A senior industry official said: “While they can’t take most of these companies private, it’s hard to imagine any American investors willingly buying these stocks.”
New powers this year mean ministers can cancel deals they see as security threats, and for those who want to take over companies in sensitive sectors such as defence, biotech and artificial intelligence, The paperwork burden is now much heavier.
But the United States has shown itself to be much more adept at pushing its weight to get what it wants in the deals.
Many ethical pension funds will not invest in defense companies, grouping them with oil and tobacco producers. For example, the £3billion Royal London Sustainable Leaders Trust, one of the UK’s largest, shuns arms manufacturers, nuclear power generators and companies that test on animals. .
In December, Babcock boss David Lockwood appealed to investors, saying a greener economy was not possible without strong security.
Part of the change is due to the expansion of large US pension funds such as BlackRock and Fidelity into markets such as the UK. But the data suggests that former large domestic shareholders of companies such as Legal & General and Invesco have reduced their stakes.
Meanwhile, major US defense firms Boeing, Lockheed Martin, Raytheon, General Dynamics and Textron are all at least 87% owned by US-based fund managers.
A pullback from investors has meant that bargain hunting has come from some unlikely quarters.
Christopher Harborne, 59, a Thailand-based businessman who gave £13.7million to Reform UK, formerly known as the Brexit Party, has quietly built up an 8pc stake in QinetiQ, which makes robots for the army and develops a top secret laser. weapons technology.
There are signs that big investors may be softening their stance on arms manufacturers. SEB, one of Sweden’s biggest banks, recently relaxed a long-standing ban on arms investments for some of its funds. And Italian arms maker Leonardo has said the EU should exclude defense investments from the bad guys list of its next investment classification system.
Babcock, Invesco, Rolls-Royce, BAE Systems and Legal & General declined to comment.