'£2bn bill' to cancel Eurofighters

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Pulling out of Britain's commitment to buy a third tranche of the aircraft would also break maintenance and upgrade deals agreed in principle with the defence company BAE Systems, The Financial Times said.

The Ministry of Defence may also have to renegotiate arrangements to upgrade existing aircraft on unfavourable terms if it stops the latest order.

The Treasury and the Ministry of Defence are reportedly due to meet to discuss the cost implications of stopping the latest order.

Critics claim the third tranche is too costly and is not essential to defence requirements.

However, the other partner nations involved in the programme - Germany, Spain and Italy - would expect to be compensated for extra costs if Britain withdraws from the third production run.

Currently a memorandum of understanding sets the ceiling for compensation and fines at £2 billion.

But there are fears the total cost could be much higher if Britain cancels, with claims from industry expected to run into hundreds of millions and jobs put at risk.

An MoD spokesman said talks with partner nations over the future of the programme were continuing.

He said: "Ministers of the Eurofighter Typhoon Partner Nations met on April 2 to discuss the arrangements for the procurement of Tranche 3 aircraft. Good progress was made, however, further discussion will be required before all nations are able to make an announcement on the way ahead."