Losing bidder in carrier contest will not get 'consolation' order

The Ministry of Defence has abandoned plans to award a "consolation contract" to whichever bidder loses out later this month in the battle for a £10bn aircraft carrier order. BAE Systems and the French defence group Thales are fighting it out for the order.

The MoD had been expected to award the unsuccessful bidder one of the other big procurement contracts that are up for grabs. One is a £2bn contract to update equipment for the British Army known as the Future Integrated Soldier Technology programme. The other is an £850m order for unmanned battlefield surveillance aircraft called the Watchkeeper programme.

An MoD spokesman said, however, that FIST would not be awarded at the same time as the carrier contract while the intention on Watchkeeper was to cut the shortlist of bidders from four to two.

The move came as the Defence Secretary, Geoff Hoon, attempted to defuse the dispute over his claim that BAE was "no longer British" because more than 50 per cent of its shares were held by foreigners.

However, Mr Hoon appeared to compound his gaffe by repeatedly referring to the company as "BA Systems" during an interview on BBC Radio 4's World at One programme – at least according to the MoD's transcript of the broadcast.

An MoD spokeswoman said the transcriber had made an error because of Mr Hoon's accent. "It is absolutely ridiculous to suggest that the Secretary of State doesn't know the company's name," she added.

In the interview Mr Hoon described BAE as a "hugely successful British company". Pressed on whether the level of foreign share ownership meant it was no longer British, Mr Hoon replied: "Of course it doesn't, but it does mean that when we are considering major investments, major defence orders in the United Kingdom, we should properly be looking at the economic benefits to the UK."

Despite his attempt to "set the record straight" the Defence Secretary came in for severe criticism in the Commons. Keith Simpson, the Conservative MP for Mid Norfolk, said the comments had "seriously damaged the financial future of a major British company".

Robin Cook, the leader of the House, rejected the allegation saying it would be "rather odd" if anything Mr Hoon had said damaged his ability to award the carrier contract to BAE.

Meanwhile BAE said it had won a $300m (£187m)US Navy contract.