Warship yards on the Clyde and at Portsmouth are soon expected to form a new UK joint venture company to build the Royal Navy's future surface fleet, in a move designed to bring stability to the industry and safeguard jobs.
An announcement of the effective merger of BAe's Scotstoun and Govan yards and VT's facility on the south coast will come within the next two weeks as Lord Drayson, the Ministry of Defence's Procurement Minister, drives through the final details of the deal.
The new company - Shipco UK has been suggested as a name - would see ownership between the two partners split 60% to BAe and 40% to VT, with an initial order book worth £2bn for Type-45 air-defence destroyers.
Lord Drayson is also intent on finally announcing the production order for the two 60,000-tonne aircraft carriers for the Navy as the centrepiece of Britain's ability to project military power worldwide.
The £3.8bn carriers, due to enter service around 2015, would more than double the value of the new venture company at a stroke and provide guaranteed employment for up to 3000 Clydeside workers and 650 at Portsmouth into the middle of the next decade.
Delays in placing the order to start cutting steel for the vessels has led to speculation that they might be cancelled as an expensive luxury at a time when the MoD is struggling to underwrite wars in Iraq and Afghanistan.
Industry sources say the ships will be ordered and that the "main gate" decision is close after tough negotiations on price and commercial risk factors over the past year.
Whitehall sources say an announcement could come just before the Scottish Parliament's May elections to boost Labour's profile in underpinning jobs, at a time when a resurgent SNP has become a serious contender for seats.
A third carrier based on roughly the same design is to be built for the French navy, allowing savings to be made on bulk component orders. At the moment, the plan is that the modular sections of the carriers will be parcelled out to various UK shipyards, with final assembly at Rosyth.
The Herald understands the MoD is to build in an option for VT to sell its stake in the new company to BAe at a future date in return for guarantees of work at Portsmouth.
The merger has been championed by the MoD as a key link in its defence industrial strategy, drawn up to force the British defence industry into a rationalised shape and size to meet foreseen military orders over the next 20 years.
As reported by The Herald earlier this month, government-to-government talks are understood to be taking place to sell up to three Type-45 destroyers to the Saudis in a £2bn deal. The Clyde yards have already launched two of the warships for the RN, are building two more and have the final two of a six-ship order to follow.
Industrial speculation says numbers five and six might be diverted to the Saudis and a seventh and eighth constructed for the Navy in a move which would help the MoD bridge a potential procurement funding gap.
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