Defence jobs under threat after US firm wins contract

The United States firm beat its UK rival for the multibillion-pound order, although it has pledged to build most of the new vehicle in the UK, saying it will safeguard thousands of jobs here.

BAE Systems had said that 500 previously-announced job losses in its vehicles business might be saved if it won the contract.

Bob Murphy, president of BAE Systems' Land and Armaments operating group, said yesterday: "BAE Systems notes the decision by the UK MoD to award preferred bidder status to General Dynamics UK for the demonstration phase of the Future Rapid Effect System Specialist Vehicles programme.

"While disappointing, today's announcement does not impact the previously stated outlook for the land and armaments business.

"The company will continue to support the UK Ministry of Defence in the land sector through, for example, the long-term partnering agreement with them on ammunition supply and on the sustainment and upgrade of the existing armoured vehicle fleet."

The decision will mainly hit a BAE Systems factory in Newcastle upon Tyne, where around 400 jobs would have been created or sustained if the British firm had won the contract.

The Ministry of Defence said the first tranche of the programme should deliver around 600 vehicles to the front line, with the possibility of further purchases in the future.

The order includes development of Scout, the principal reconnaissance vehicle that will replace the Scimitar vehicle.

The MoD said the Specialist Vehicle fleet will provide improved protection against a wide range of threats and bring "significant benefits" to the Army, including greater firepower and reliability.