Vosper Thornycroft, the warship builder, is cutting 300 jobs after the Government yesterday announced that GEC's Yarrow shipyard had won a fiercely fought tender to build three new navy frigates.
Although the pounds 400m order for Type 23 frigates would save some of the job cuts recently announced at Yarrow's Clydeside yard, the news comes as a bitter blow to the rival Southampton-based contractor.
The decision was announced in the House of Commons by the Defence Procurement Minister, James Arbuthnot. He said both yards had submitted high-quality tenders but the prices offered by Yarrow were "significantly lower".
He said: "Our decision has been reached on the basis of best value for money for the taxpayer. It does not in any way reflect adversely on the capabilities of Vosper Thornycroft as a builder of warships."
Yarrow said it was delighted with the order; work would begin immediately and would stretch beyond 2000.
Winning of the contract would reduce the number of redundancies announced last month from 650 to 450. It would also mean that further heavy job losses to be announced at the end of April would be reviewed.
But Vosper Thornycroft, which last year warned of hundreds of job losses if it lost the order, said the news would mean about 300 redundancies over the next 12 months from its 1,500-strong workforce. Another 150 people would not have their short-term contracts renewed at the company, which has been rumoured as a possible takeover target of British Aerospace. Vosper shares plunged 41p to 835p after yesterday's news.
The company said that it remained in a strong financial position with an order book in excess of pounds 400m - including seven minehunters for the Royal Navy.
Managing director Martin Jay said: "This is a very bad day for Vosper Thornycroft and for the South Coast. We are obviously disappointed that we lost since we submitted a very attractive offer. We are saddened at the prospect of job losses but will continue to do everything possible to win an export order in the not-too-distant future."
Davey Hall, president of the Amalgamated Engineering and Electrical Union, said it was a "tragedy" for the workers at Vosper Thornycroft. "It demonstrates the continuing decline in the shipbuilding industry which has resulted from years of Government neglect," he said.
Yesterday's contract brings the number of Type 23 frigates ordered to 16. The three new ships, part of the "Duke" Class, will be named HMS Kent, HMS St Albans and HMS Portland.
One analyst, who declined to be named, said the loss of the contract would cost Vosper Thornycroft about pounds 3.5m in lay-off charges this year. However, he said there will be a delayed effect only on profits because Vosper accounts conservatively for contracts under tender. But - after losing the Royal Navy order - Vosper urgently needed export contracts to avoid a fall in profits in 1998/1999.