BAE Secures Warship Contract Worth $4.8 Billion From U.K. Government

By Robert Wall Features Dow Jones Newswires

The British government signed a long-anticipated 3.7 billion pound ($4.8 billion) contract with BAE Systems to start building three new warships after protracted contract talks.

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The three frigates, called the Type 26, are the first of a batch of eight ships Britain is buying for the Royal Navy.

"We will cut steel on the first ship later this month--a hugely significant milestone that delivers on our commitment to maintain our global naval power," British Defense Secretary Michael Fallon said in a statement Sunday.

The U.K. originally was going to buy more of the ships, but cut the number in a cost-savings move during a defense review in 2015. Instead, it said it would follow procurement of the submarine-hunting warships with a new program for lower-cost, more exportable vessels.

The British Defense Ministry said the first Type 26 would enter service after 2020 without giving a precise data. Past warship programs in the U.K. have suffered delays.

The government said the contract with BAE Systems would be structured to share benefits if things go smoothly while the pain of any delays would be partly borne by industry.

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The purchase of the remaining five ships won't be finalized until the next decade, the ministry said.

The U.K. also is in the process of introducing two new aircraft carriers. The first, the HMS Queen Elizabeth, took to the sea for the first time last week. It will be formally handed over to the Royal Navy later this year.

-Write to Robert Wall at robert.wall@wsj.com.

(END) Dow Jones Newswires

July 01, 2017 19:15 ET (23:15 GMT)