Swan Hunter at risk after losing out on carrier contracts

The project to build two aircraft carriers for the Royal Navy took a step forward yesterday after the Government committed £300m towards the design of the ships and named the four shipyards that will handle the bulk of the construction.

But the announcement by the Secretary of State for Defence, John Reid, threw the future of the Swan Hunter shipyard on Tyneside into doubt after he confirmed it would not be part of the alliance team selected for the £2.9bn programme.

Mr Reid maintained, however, that Swan Hunter would be free to bid along with other yards and possibly non-shipbuilders for the 40 per cent of the contract still open to competition. He added that the project would sustain or create 10,000 UK jobs.

The two 65,000-tonne carriers - the biggest and most powerful ships ever built in the UK - will be constructed in four blocks. Two will be built by BAE Systems at its Govan and Barrow yards and the other two will be constructed by VT at Portsmouth and Babcock's Rosyth yard in Scotland. VT and Babcock will join BAE, the Halliburton subsidiary KBR, Thales of France and the MoD itself as part of the alliance team. BAE will be in overall charge of the design of the two carriers while final assembly will take place in Rosyth.

The construction work-share announced yesterday will account for 60 per cent of the contract by volume but Mr Reid said the remainder of the work - including the construction of the upper part of the ships between the hangar and flight decks will be put out to open tender.

Mr Reid refused to comment on the MoD's share in the alliance, the final costing of the programme or whether the two carriers would meet their planned in-service dates of 2012 and 2015. These issues will be fixed when the MoD reaches "main gate" on the contract, which is expected to be around the end of next year. Industry sources said the final cost of the two vessels was likely to be about £3.5bn.

In the meantime, the MoD has agreed to spend £300m to develop the design of the ships to the point where manufacturing can begin. The two ships are being built to a design put forward by Thales and Mr Reid said it is still possible that the UK will end up collaborating with the French if they decide to build a carrier to the same specification.

BAE, Thales and VT all welcomed Mr Reid's announcement, saying it gave clarity as to the roles and responsibilities of the different members of the alliance, enabling them to press ahead with detailed costings of the programme.

The carriers will be equipped with 40 short take-off and vertical landing versions of the Joint Strike Fighter aircraft and staffed with 1,500 personnel.