Government buys British with defence contracts worth £5bn

Arms contracts worth £5bn and up to 10,000 jobs in Britain were announced by the Government yesterday in a move which saw United States suppliers sidelined in favour of a European defence system.

Geoff Hoon, the Defence Secretary, unveiled a package which was effectively a snub to US manufacturers despite intense lobbying by Washington. Tony Blair is reported to have discussed the issue with President Bill Clinton during a telephone call on Monday night.

Mr Hoon said £1.5bn will be spent on developing missiles by the BAE-led Meteor consortium for the the new Eurofighter in preference to a bid by the US Raytheon Group. Another £3.5bn will be spent on a new European Airbus A400M aircraft to provide heavy lifting capability for British troops in operations such as Kosovo and Sierra Leone in preference to US C17 Globemaster aircraft.

However, in what is believed to be a consolation for the US, £500m is to be spent leasing C17s to replace the ageing fleet of Hercules transport planes until the new Airbus aircraft comes into service. It will also order £200m worth of Raytheon missiles until the Meteor is available.

The missile contract will safeguard and create a total of 1,200 jobs at Stevenage, Bristol and Stanmore, while the order for the A400M will lead to 3,400 long-term high-skill jobs at BAE sites at Filton, Broughton and Prestwick. With future exports and indirect job creation taken into account the total number of jobs could rise as high as 10,000.

The decision to take the Meteor contract effectively means that other European countries will also reject the Raytheon option, say defence analysts.

Tom McDonald, of the British American Security Information Council, said: "This appears to be a definite move towards a pan-European defence strategy."