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Australia and the UK have signed a defence and security treaty and announced £2.4bn in Australian investment in Rolls-Royce’s nuclear reactor facilities as the two nations tighten ties in the face of rising Chinese power.

The treaty, signed in Canberra on Thursday by Australian defence minister Richard Marles and his UK counterpart Grant Shapps, formalises consultation over national security matters between the two countries and makes it easier to operate together on joint exercises and maritime security.

The pact builds on the Aukus partnership that Australia signed in 2021 with the US and UK to overhaul its defence strategy and respond to China’s military build-up.

Highlighting the boost to Britain’s biggest defence companies from Aukus, Australia will invest £2.4bn in expanding Rolls-Royce’s nuclear reactor facilities in the UK to supply submarines to be built by a BAE Systems joint venture.

Aukus is intended to deliver nuclear-powered submarines to the Pacific country, which is overhauling its navy in response to regional tensions.

Shapps said in an interview with the Financial Times that security in the Indo-Pacific was “pivotal” for the UK.

“There is a much more assertive, epoch-defining China particularly in this region but for the world as well,” he said. “So it’s doubly important to be absolutely clear that we want to live in a peaceful world. A peaceful world includes things like freedom of navigation and playing by the rules, and the world order is worth protecting.”

The UK emerged as a big winner from the Aukus deal. A British design was selected for the “SSN-Aukus” submarines to be supplied to Australia. Both countries will operate SSN-Aukus boats.

Shapps said the project would create 7,000 British jobs at sites including at Barrow-in-Furness in Cumbria and Derby and that the long-term deal — the submarines are planned to go into service in the 2040s — would have a substantial impact on the UK economy. 

“I think there’s actually also a wider benefit to British business, which we think is probably a £10bn boost to UK industry over the life of the programme,” he added.

Ian Hall, professor of international relations at Griffith University, said the security deal was a sign of commitment from the UK to work with Australia after 50 years when it has not had a “consequential presence”.

Hall said that it would pave the way for British submarines to “rotate” through Australian bases, but that “all eyes are still focused on whether or not the two can produce that elusive nuclear-powered submarine for Australia, where and how they’ll do it, and how soon they’ll deliver”.

The submarines for Canberra will be built by a joint venture between Australian government-owned ASC and BAE. The UK defence company builds all of Britain’s nuclear submarines at its yard in Barrow, where it will also build the SSN-Aukus boats for the Royal Navy. 

BAE last year secured a £3.95bn contract from the UK government to help cover design and development of the Aukus programme. Its 13,500-strong workforce in Barrow will rise to 17,000 as a result. 

Charles Woodburn, BAE chief executive, said the company was “making good progress” on design and development of the submarines. BAE’s selection to help build Australia’s submarines would ensure an “integral connection between the UK design and the build strategy development in Australia”, he said.

Rolls-Royce will build the reactors for the new boats at its Raynesway plant in Derbyshire. The £2.4bn investment will help it double the size of the factory, creating more than 1,000 new jobs.

The Aukus pact and submarine plan have been fiercely debated in Canberra, especially with a US election looming that could have ramifications for Washington’s foreign policy.

Shapps said meetings in January in the US had strengthened his confidence in the commitment to Aukus. “Republicans really like it. Democrats really like it. I think it’s one of the least controversial items in US politics,” he said.

The terms of the joint venture between BAE and ASC have not been finalised, but work has begun at Osborne in South Australia using components produced in Derby.

Marles said the timeframe to construct the submarines remained “challenging”. “Every day between now and then counts,” he told a press conference.