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| Navy carriers '£1bn over budget' | Navy carriers '£1bn over budget' |
| (about 1 hour later) | |
| A £1bn cost over-run is threatening the future of the publicly-funded project to build Britain's biggest aircraft carriers, the BBC has learnt. | A £1bn cost over-run is threatening the future of the publicly-funded project to build Britain's biggest aircraft carriers, the BBC has learnt. |
| A memorandum from the lead contractors seen by the BBC suggests there will "be a fight for the programme's survival". | A memorandum from the lead contractors seen by the BBC suggests there will "be a fight for the programme's survival". |
| The memo also discusses ways to cut costs, including the possibility of 400 to 500 redundancies. | The memo also discusses ways to cut costs, including the possibility of 400 to 500 redundancies. |
| The Ministry of Defence said it was currently re-costing the programme and accounts would be published in July. | The Ministry of Defence said it was currently re-costing the programme and accounts would be published in July. |
| Work on the two warships - HMS Queen Elizabeth and HMS Prince of Wales - had been delayed in December but was due begin soon. | Work on the two warships - HMS Queen Elizabeth and HMS Prince of Wales - had been delayed in December but was due begin soon. |
| This massive inflation in costs will be widely seen as alarming Robert Peston, BBC business editor Read Robert's blog | This massive inflation in costs will be widely seen as alarming Robert Peston, BBC business editor Read Robert's blog |
| They were due to come into service in 2014 and 2016, as the biggest and most powerful warships the UK has ever built. | They were due to come into service in 2014 and 2016, as the biggest and most powerful warships the UK has ever built. |
| Much of the work is due to take place at Scottish shipyards in the Clyde, where 4,000 jobs are dependent on the project. | Much of the work is due to take place at Scottish shipyards in the Clyde, where 4,000 jobs are dependent on the project. |
| Costs to soar | Costs to soar |
| The project's cost is now expected to rise from £3.9bn to around £5bn. | The project's cost is now expected to rise from £3.9bn to around £5bn. |
| Armed Forces Minister Quentin Davis MP: 'We have to live within our annual budget' | |
| The memo was written for the chief executives of the companies participating in the project and attributed the cost increase to "a combination of direct costs, inflation and accounting adjustments". | The memo was written for the chief executives of the companies participating in the project and attributed the cost increase to "a combination of direct costs, inflation and accounting adjustments". |
| "The MOD [Ministry of Defence] will publish its annual report and accounts in July; these will show £1bn of QE Class cost growth and the project will come under severe pressure through the opposition and the media," the memo said. | "The MOD [Ministry of Defence] will publish its annual report and accounts in July; these will show £1bn of QE Class cost growth and the project will come under severe pressure through the opposition and the media," the memo said. |
| "This is a very real fight for the programme's survival," it adds. | "This is a very real fight for the programme's survival," it adds. |
| The memo also suggests the future of the Appledore shipyard in Devon could be under threat and possible measures to reduce costs include "substantial redundancies" of the order of 400 to 500. | The memo also suggests the future of the Appledore shipyard in Devon could be under threat and possible measures to reduce costs include "substantial redundancies" of the order of 400 to 500. |
| HMS QUEEN ELIZABETH AND HMS PRINCE OF WALES Displacement: 65,000 tonnesLength: 280m (920ft)Width (at flight-deck level): 70m (230ft)Keel to masthead: 56m (184ft)Nine decks (plus flight deck)Speed: 25+ knotsRange: 8,000-10,000 milesAircraft: 36 F-35 Joint Strike Fighters and four Airborne Early Warning aircraft, plus EH 101 Merlin helicoptersCrew: 1,450 (including air crew)Weapons: Phalanx close-in weapon systems; 30mm and mini-guns Source: Ministry of Defence | |
| The BBC's business editor Robert Peston said the increase in costs would be seen as alarming, especially at a time when there are intense pressures on the government to cut public spending. | The BBC's business editor Robert Peston said the increase in costs would be seen as alarming, especially at a time when there are intense pressures on the government to cut public spending. |
| He added that if the project was scrapped, the knock-on effects would be serious. | He added that if the project was scrapped, the knock-on effects would be serious. |
| For example, some 80,000 tonnes of steel worth £65m has been ordered from Corus, the beleaguered Anglo-Dutch steelmaker. | For example, some 80,000 tonnes of steel worth £65m has been ordered from Corus, the beleaguered Anglo-Dutch steelmaker. |
| A consortium of companies are involved in the project including BAE System, VT Group, Babcock and Thales. | A consortium of companies are involved in the project including BAE System, VT Group, Babcock and Thales. |
| BAE Systems said that the delay to the project announced earlier was always expected to lead to an increase in costs. | BAE Systems said that the delay to the project announced earlier was always expected to lead to an increase in costs. |
| The work is split between various yards, including Portsmouth, Rosyth, and Hebburn. | The work is split between various yards, including Portsmouth, Rosyth, and Hebburn. |