Philip Hammond, the Defence Secretary, has been told that the historic Portsmouth Dockyard should be shut down and the supercarrier warship programme delayed in a report he commissioned into the future of British shipbuilding.
The recommendations could put up to 3,000 jobs on the south coast at risk, while the second of the 65,000-tonne £5bn supercarriers would be delivered at least two years later than planned to sustain workload at defence giant BAE Systems' other dockyards.
The move would be a massive blow for Portsmouth, which can trace its naval roots back to the early 13th century and was where the Mary Rose was built in 1509.
BAE is sensitive over the likely closure of a dockyard, having come under fire from workers and politicians over job losses in Brough, North Yorkshire, and the shutdown of the 165-year-old Vickers Armstrong factory in Newcastle. However, The Independent on Sunday revealed in January that BAE had hired LEK Consulting to examine the future of Portsmouth and two dockyards on the River Clyde.
BAE was concerned that work would dry up once the second supercarrier, the Prince of Wales, was launched in 2018, with the Type 26 Global Combat Ship programme not commencing until 2020.
Following this news, the Ministry of Defence asked Admiral Sir Robert Walmsley, a former chief of defence procurement, to look into the supercarrier programme. Sir Robert's report is now sitting on Mr Hammond's desk and forms a major chunk of the defence department's value-for-money review of its biggest projects.
Under the terms of a 15-year agreement struck with BAE's shipbuilding arm in 2009, the department would have to cover the cost of any dockyard closure, while it has also guaranteed £230m of shipbuilding and support work a year. A Whitehall source said that the report showed there will soon be "excess capacity" in Britain's shipbuilding industry, and that it had listed four BAE dockyards in order of risk of shutdown.
The 169-acre Barrow-in-Furness shipyard – not thought to be included in LEK's assessment – was "bound to survive … as it can build anything", which includes submarines. Scotstoun and Govan in Scotland were also likely to be safe, while Portsmouth is "vulnerable".
"If they don't shut something the shipyards will be inefficient, we all have to face up to that," said the source, who added work would still be needed to prevent workers kicking their heels ahead of the Type 26 programme. "They might want to keep the Prince of Wales carrier building programme running, as you can't improve efficiency without a market."
An MoD spokesperson said: "The current Government asked the new Chief of Defence Materiel to review all of our major projects to assess progress and value for money. Sir Robert Walmsley's report is part of this process and the department will consider its findings in detail."
Referring to the LEK report, a BAE Systems spokesperson said: "As part of our business planning activity, we are reviewing how best to retain the capability to deliver and support complex warships in the UK in the future."