BAE wins £3bn ammunition contract

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Defence officials said the contract, worth up to £3 billion, will ensure frontline forces have a secure supply of bullets.

The long-term agreement will also allow BAE to carry out much-needed modernisation work on munitions factories in the UK, some of which are relying on machinery dating back to the Second World War.

The announcement will safeguard 1,700 jobs at the firm's plants in Birtley, County Durham, Glascoed, South Wales, and Radway Green in Crewe.

A £120 million investment programme at the three sites will improve efficiency and make the facilities safer.

Under the arrangement, the firm will supply around 80% of the ammunition used by the military for operations and training, from 5.56mm bullets for the SA80 rifle to mortar rounds and artillery shells.

Senior MoD official Peter Northern said the Munition Acquisition Supply Solutions (Mass) agreement would help cope with the increased demand for ammunition as a result of operations in Iraq and Afghanistan.

He said it was "crucial" to award the contract to a UK company to protect against worldwide shortages in ammunition manufacturing capacity.

Colonel David Collins paid tribute to staff at the three plants for the way they had responded to the increased level of operations and training.

He said the factory in Crewe last year produced up to a million rifle and machine gun rounds a day, which was "quite a significant achievement".