Plans to privatise part of the Ministry of Defence's secret research agency would cost thousands of jobs, trades unions have warned.

They say splitting the Defence Evaluation and Research Agency in two - with the most secret work being kept in the public sector - would mean up to 3,000 job losses.

The MoD is believed to be considering the public/private split after the United States scuppered plans to privatise the whole agency.

Dera runs a clutch of secret laboratories for chemical and biological warfare and weapons systems research.

When the Government announced in May 1998 that it was hoping to inject new private sector capital into the agency, one idea was a majority sell-off to private investors.

But US reluctance to share defence secrets with a private company is thought to have led to a rethink.

However Sean Clarke, representing Dera's seven trade unions, said the latest plan to split Dera would be "crazy".

"If this proposal is accepted and it does go before ministers in late February it will include the costs of interfaces that would have to be put in place," he said.

"I would say that between 2,000 and 3,000 jobs would be put at risk by this proposal.

"It's the worst possible option both for us and for the country as a whole."

MoD denies U-turn

Dera is one of Europe's largest research organisations, with a turnover of approximately £1bn and about 12,000 staff.

It runs some of the most sensitive military sites in Britain, including the germ warfare centre at Porton Down.

The Ministry of Defence denied plans had been changed.

A spokesman said: "We intend to go ahead with the public-private partnership.

"We put a consultation last year on a specific form of proposals and since last year we have extended our consultations beyond that template. No decisions have been made."

Bruce George, Labour chairman of the Commons Defence Select Committee, said the Government's original plans had run into strong opposition from the US, the committee and defence companies.

"It looks as if they are now taking on an alternative that will be less obnoxious than the Treasury inspired-proposals which we have seen over the past 16 months," he said.

But he would probably still have concerns over the latest plan, saying: "I would be most critical of splitting it up into two bodies."

He said the whole handling of the plans for a Public Private Partnership had been "really messy".

The committee would grill Defence Secretary Geoff Hoon about the sell-off when he appeared before it on Wednesday, Mr George said.