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Last Updated: Thursday, 13 July 2006, 11:47 GMT 12:47 UK
Yard blow as ship work switched
Swan Hunter shipyard
The future of the Tyneside yard may lie with ship breaking
A troubled Tyneside ship building yard is to lose a contract to a rival yard in Scotland.

The Ministry of Defence (MoD), said it and Swan Hunter had agreed to close the contract, despite only one of the two ships commissioned being completed.

The ship, Lyme Bay, will now be transferred to BAE Systems at Govan.

The MoD said cost growth and delays led to the decision. It is not yet clear how the loss of the contract will impact on the 300-strong workforce.

'Difficult decision'

Minister for Defence Procurement Lord Drayson said: "This has been a difficult decision for the MoD.

"Our priority has always been effective delivery of the required military capability, which we have attempted to achieve through successful completion of the contract with Swan Hunter.

"However the cost growth and delays on this project have been unacceptable. The MoD has reached the conclusion that the contract no longer represents value for money."

Swan Hunter owner Jaap Krose said: "I am obviously disappointed with the outcome but the Ministry of Defence has taken this decision because it makes financial sense to finish the last two ships in the one shipyard."

Earlier this year, Swan Hunter was granted permission by the Environment Agency to dismantle ships.

The MoD said it was working with regional development agency One NorthEast to identify future opportunities for apprentices employed at the yard.

BAE, which owns the Govan yard, said the work would not mean new jobs on the Clyde.


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