VSEL poised to secure £600m order from Navy

VSEL is poised to win a £600m order to build the Royal Navy's new assault landing ships, to replace HMS Fearless and HMS Intrepid.

News of the contract is likely to force GEC and British Aerospace, currently locked in a takeover battle for the Cumbria-based company, to reassess their valuations. Their bids have lapsed, pending a decision due next month from the Monopoly and Mergers Commission.

Last night, an adviser for BAe confirmed the order for the assault ships, known as LPDs, was a fillip to VSEL and would have to be taken into account in any new offer.

"Everything lapses, until the MMC is finished," said the adviser. "When it comes back, we will have to look at the circumstances again in the light of its report and any new circumstances. The order increases the yard's workload and will have to be looked at."

When the deadline for bids passed three days ago, contrary to expectations and to the embarrassment of the Ministry of Defence which is keen to develop competition among suppliers, VSEL was the only yard to have shown any interest. Expected bids from GEC, which owns the Yarrow yard, and Vosper, did not materialise.

The MoD has asked VSEL to formally submit a tender on a so-called "napnoc" basis - no agreed price, no offer of a contract. Subject to the price being agreed, VSEL will get the order.

While the final decision is not expected for months, it cannot come too soon for VSEL, which has shed thousands of jobs in the past few years, mainly at its Barrow-in-Furness home, and is anxious to diversify away from submarines.

Only last week, another 600 jobs went, taking the workforce to about 5,000 compared with 14,500 a few years ago.

Since the Seventies, the company has concentrated increasingly on submarines, most recently building the Trident vessels. While that specialisation has served VSEL well - providing steady profits when other shipyards have gone to the wall - it has left the company dangerously exposed.

Noel Davies, VSEL's chief executive, said yesterday: "This could be good news for VSEL and for Barrow but nobody should imagine the placing of the order is a foregone conclusion. We face some tough negotiations in the coming months before we can be certain the contract has been awarded. Affordability is the key issue."

John Hutton, the Labour MP for Barrow, welcomed the news that the yard which dominates almost every walk of local life looks set to win vital new work.

He was not impressed, though, with the repercussions for the MoD's procurement policy. He was also concerned that, despite the lack of a competitor, the Barrow yard still faced months of delay before securing the contract.

The MMC last week delayed for a month its report into the takeover bids being mounted for VSEL by GEC and British Aerospace because of the complexity and amount of work involved.