"We are confident that in this environment the need for more efficient delivery of technical and support services will lead to an increased demand for outsourcing," Babcock said.

The company has identified "significant additional opportunities" after being involved in talks with the Ministry of Defence and other government departments on potential outsourcing contracts in recent months.

Spending cuts will hit sales growth in the short term, the company acknowledged, but Babcock said it expected to meet its targets for the first half of the year.

Shares in the company, whose contracts include maintaining Britain's fleet of nuclear submarines, rose 23 to 574.5p on the news.

Babcock completed the acquisition of rival VT Group in July, and said its net debt position at the end of the half is likely to be lower than expected because of "excellent" cash generation.

The company is also confident of achieving the £50m of savings a year identified in its takeover offer. Babcock agreed to buy VT for £1.33bn in cash and shares in March.

The company said its modifications of the Rosyth dockyard to accommodate the final assembly of the Royal Navy's new aircraft carriers is mainly complete, with a 1,000 tonne crane installed. Training work for the three armed services has not been affected by the halt in new business awards during the spending review, and Babcock's rail maintenance business also improved.

Babcock's order book stands at £12bn, and the company has bids in for work worth another £5bn.

Source:http://www.telegraph.co.uk/finance/newsbysector/industry/engineering/8032897/Babcock-expects-to-benefit-from-Government-spending-cuts.html