Britain's strategic safety and the national ability to design and build warships are at risk because a "dysfunctional" Ministry of Defence has gone to war with a peace-time accountant's mentality, according to a former deputy chief of the defence staff.

Vice-Admiral Sir Jeremy Blackham, who edits Naval Review and is vice-president of the Royal United Services' Institute, says the Royal Navy is on the brink of "losing irretrievably" its ability to act as a decisive force in world events for the first time since Nelson's day.

Writing jointly in the April issue of the prestigious RUSI journal, Admiral Blackham and Professor Gwyn Prins of Columbia University and the London School of Economics argue that the UK's armed forces are in deepening crisis because of overstretch and chronic under-investment.

They also claim that it is now "a credible possibility" that it could take a British military defeat in Iraq or Afghanistan to change Whitehall's penny-pinching mindset.

Their accusations add to a list of high-profile public warnings from leading military officers and the Commons Defence Committee in recent months that there are too few service personnel and too little equipment for the tasks they have been given.

General Sir Richard Dannett, the chief of the general staff, said in December that the tempo of military commitments was close to breaking the covenant between armed forces and government. His predecessor, General Sir Mike Jackson, marked his retirement last year by accusing the MoD and successive governments of being responsible for "a generation of neglect".

And Admiral Sir Jonathon Band, the First Sea Lord, called in January for an extra £1bn to pay for fuel, accommodation and an overdue wage boost for his sailors. He also warned that looming cuts threatened "to turn the Royal Navy into the Belgian Navy".

Admiral Blackham said in the RUSI article that the Navy has been its own worst enemy, displaying a can-do attitude "which has disguised the accumulating crisis of the last decade from the public".

Despite the government line that 28 ships had joined the fleet since it was elected in 1997, only four of these vessels were destroyers or frigates at a time when holding a basic line on essential naval tasks required the construction of one a year. Prime Minister Tony Blair's government had, in fact, ordered just eight ships since it came to power.

There was no expectation of major new construction after the two planned aircraft carriers and the last of the Clyde-built Type 45 destroyers are launched in the middle of the next decade, leaving a gap which would see the fleet decline steadily in numbers and capability.

The consequent dependence on other nations for construction would then expose the UK to "significant sovereign risk which it has not run for centuries".