General Dynamics Corp share price up, signs a $5.76-billion UK army contract

General Dynamics Corp. has secured a £3.5-billion ($5.76 billion) deal to build nearly 600 fully-digitalized armored vehicles for the UK army as a sign of Britains commitment to protecting the interests of the North Atlantic Treaty Organization.

The deal, coming in one day before the UK hosts Natos biennial summit in Newport, Wales, includes the purchase of 589 of the so-called Scout Specialist Vehicles, which are being designed in Wales.

Effectively a small tank, the Scout SV is an infantry vehicle that can be fitted with a 40 mm cannon. Equipped with advanced communications systems, the vehicle can serve as a command post or to carry personnel. It will be available in six variants and will allow the British Army to “conduct sustained, expeditionary, full-spectrum and network-enabled operations with a reduced logistics.”

General Peter Wall, chief of the British General staff, called the Scout SV the eyes and ears of battlefield commanders. “The Scout family is a transformational program that will refresh our armored capability and ensure the army remains a first-tier maneuver force,” General Wall added.

The British government paid £500 million in 2010 for the development of seven prototype vehicles, which were unveiled in June. Deliveries are expected to start in 2017, with the first brigade planned for deployment by the end of the decade, and should be completed through 2024. The contract also includes the provision of initial in-service support and training.

The UK is one of only four Nato members who meet a spending target for armored forces of 2% of GDP or more. However, that ratio may decline as the economy grows while the government has shown commitment to freeze any increases in spending on personnel and limit gains in spending on equipment to an annual 1%. With these plans in mind and troops being pulled out from Afghanistan, military expenditure may drop to as much as 1.7% of GDP, some economics forecast.

The contract will bolster Britains labor market, with job creation being one of the headlines ahead of next years general elections.

U.K. Prime Minister David Cameron said in a statement: “Not only will they be crucial in helping to keep Britain safe, they will also underpin nearly 1,300 jobs,” referring to the Scout SVs. “We are ensuring Britain’s national security, staying at the forefront of the national race and providing leadership within NATO,” Cameron added.

General Dynamics Corp rose by 1.13% by 13:37 GMT to $124.05 on Wednesday in New York, marking a one-year change of +47.05%. The company is valued at $41.01 billion. According to CNN Money, the 18 analysts offering 12-month price forecasts for General Dynamics Corp have a median target of $135.00, with a high estimate of $156.00 and a low estimate of $120.00. The median estimate represents a +10.06% increase from the previous close of $122.66.