Royal Navy's new supply fleet could be built cheap in China

Britain could have its first fleet of naval ships built in China under plans being drawn up by shipbuilder VT Group.

Britain could have its first fleet of naval ships built in China under plans being drawn up by shipbuilder VT Group.

The company is preparing to bid to supply the Royal Navy with up to 15 support vessels, in a contract thought to be worth £2bn.

But in a bit to reduce costs, VT is exploring the possibility of making the ships' hulls in China. The move would be controversial as the Ministry of Defence (MoD) insists that all warships be assembled in Britain.

However, VT believes that because the ships in the so-called Mars programme will be used to support front-line warships, the "made in Britain" rule will not apply.

Paul Lester, the chief executive of VT, said: "There could be an opportunity to get some of the hulls of those ships built in China or Eastern Europe and then brought over to the UK. The Mars programme brings that potential because they are support ships; they are not typical."

Assembling the hulls abroad would save a lot of money, he said. "There is no doubt that the cost of producing steel and doing some of the fabrication work offshore would be 25 to 30 per cent less than doing it in the UK. But a lot of work needs to be done to establish quality and reliability," he said.

The MoD kicked off the procurement process for the ships last month by asking companies to express an interest in bidding. It is understood that the MoD wants to sign contracts with a shipbuilder by the end of the year. VT is expected to face competition from BAE Systems and Swan Hunter.

The ships built under the Mars programme will replace out-of-date Royal Fleet Auxiliary craft that supply the Navy with oil, ammunition and food.

Mr Lester also confirmed that VT was planning to join an EADS-fronted bid to supply up to 100 air-to-air refuelling jets to the US Air Force. "We have 3,500 people in the US and we will be pitching to support the programme," he said.

The Pentagon is preparing to announce that it is open to bids on the $20bn (£11bn) programme after the collapse last year of a deal with the scandal-hit Boeing. EADS, which wants to supply converted Airbus A330 jets, is now in talks with US defence contractor Northrop Grumman about forming a joint venture.

EADS refused to comment, but a spokesman for Northrop Grumman said: "The tanker programme represents a large opportunity in our industry. We are looking at all options, including teaming up with EADS."

If EADS joins with the US contractor then it is likely that the A330s be converted into tankers at Northrop Grumman's Florida facility.