LONDON (Reuters) - The government has awarded U.S. firm General Dynamics the contract to build new armoured vehicles for Britain's army, a significant blow to UK bidder BAE Systems which had hoped to win the deal.
The contract is the first phase of the 4 billion pounds contract to build armoured reconnaissance vehicles to replace Britain's ageing Scimitar scout vehicle -- seen as vulnerable to roadside bombs -- with better protection and firepower.
"Preferred bidder status has been awarded to General Dynamics UK for the demonstration phase of the specialist vehicle programme, subject to successful completion of contractual negotiations," Britain's defence secretary Bob Ainsworth said in a statement.
"General Dynamics UK's proposed solution contains 73 percent UK content within the supply chain and the assembly, integration and test facilities at the Defence Support Group Donnington."
General Dynamics UK has previously said 10,500 UK jobs would be safeguarded or created over the 10-year lifespan of the deal, if it won the bid.
"This ensures the sustainment of UK jobs, UK skills and UK capabilities within the armoured vehicle sector," said Ainsworth.
Shares in General Dynamics were 0.5 percent down at 75.14 cents in New York by 2:25 p.m.
BAE had said it would protect and create a total of 800 jobs at its manufacturing site in Newcastle, north-east England to make the deal more attractive to Britain's Ministry of Defence (MoD).
Europe's biggest military contractor originally planned to build most of the parts for the Scout armoured vehicle in Sweden.
BAE spent 50 million pounds over five years developing a contender based on the latest version of its CV90 chassis, that currently operates in three countries, including Afghanistan.
The company, which announced 500 redundancies last year, said last week it would be forced to make further cuts if it lost out on the contract.
(Reporting by Rhys Jones; editing by Victoria Bryan)
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