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Job security on hold as arms contract delayed.

Byline: By Guy Anderson

Amilitary contract which could safeguard hundreds of jobs in the region has been delayed by Government attempts to cut costs.

Alvis-Vickers is working with the Ministry of Defence to help plan the Future Rapid Effect Systems; a new generation of medium-sized armoured vehicles expected to go into service in 2009.

The defence giant - which employs 450 people in Newcastle - is the favourite to win the contract, and is currently working with BAE Systems.

The pounds 2bn project was expected to be given the go ahead last month but the Government's Investment Approvals Board - the department responsible for signing off large schemes - has delayed approval.

Treasury officials are reported to be looking at ways of reducing costs, including putting the project out to international tender. A decision is now expected to be made in the autumn.

An analyst at Jane's Defence Weekly said: "'Smart procurement' means the Ministry of Defence is under pressure to get the best deal for the lowest cost.

"The Treasury could be wondering if they could get a better price abroad or by cutting the number of FRES variants."

The delay comes after a contract to build two Royal Navy aircraft carriers - which could create up to 5,000 jobs in the North - was held up.

Lead contractor BAE Systems warned the Ministry of Defence in July that it must find an extra pounds 1bn to fund the project or accept a reduction in specification.

The row is expected to delay the construction of the ships at Swan Hunter, Wallsend, by up to two years.

FRES vehicles - which will go into service between 2009 and 2013 - will form the backbone of military transport, replacing ageing FV430 and Saxon fleets.

North-East defence analyst Robin Ashby said: "The word is that big programmes may be under threat because the MoD is strapped for cash.

"FRES, however, is essential to the military. Medium weight air transportable armoured vehicles are key to current defence strategies."

The 450 workers at Alvis-Vickers' Scotswood Road plant will be occupied for the next five years building new Trojan and Titan heavy vehicles for MoD engineering divisions.

The FRES project would guarantee work at the factory for a further five years.

A spokesman for Alvis Vickers said: "As a world class armoured vehicle manufacturer we believe we are well placed to play a major role and are keen to do so.

"We have a team working on it but it is for the government to decide who the contracts are awarded to.

"It is a very big project, and we are working with the Ministry of Defence to establish their requirements."
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Publication:The Journal (Newcastle, England)
Geographic Code:1USA
Date:Aug 5, 2003
Words:439
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