Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Rachel Reeves will on Friday sign off a £1bn defence contract that will be crucial for the survival of Britain’s last military helicopter manufacturing site.
Treasury officials said the chancellor was approving the contract with Italy’s Leonardo for new battlefield helicopters to ensure that UK defence spending protected jobs and investment in the country.
“Rachel cares about keeping the country safe and driving jobs in the UK because our security and economic growth are fundamentally connected,” said one official.
Under the contract, Leonardo will build medium-lift military helicopters at its Yeovil site to replace the ageing Pumas that have been used for decades by the Royal Air Force.
Leonardo has been the sole bidder for the competition since September 2024 after America’s Lockheed Martin and Europe’s Airbus withdrew.
A decision on whether to proceed with the contract, however, has been held up as the Ministry of Defence has wrestled with a budget shortfall which has also held up the publication of the Defence Investment Plan.
The DIP is due to set out the military capabilities that the government plans to invest in to equip Britain’s armed forces for modern warfare.
Treasury officials claimed the MoD had sought to deprioritise the contract as part of its forthcoming DIP.
“This project is key to [the chancellor’s] principles — she wasn’t going to let this deal collapse under her watch,” said one.
The MoD said: “The UK’s New Medium Helicopter (NHM) programme is ongoing and no final procurement decisions have yet been made. That outcome will be confirmed in due course.” People close to the MoD said there was a requirement for military helicopters in the DIP.
Roberto Cingolani, chief executive of the Italian group, warned last year that the company would reconsider its investments in the UK if the government did not proceed with the contract. “We cannot subsidise Yeovil forever — it’s 14 years that we don’t get any contracts from the UK government,” he told inventors.
The decision to agree the contract comes just days before Leonardo’s offer was due to expire on Sunday.
The contract is expected to secure about 3,000 jobs on the site as well as thousands more in the wider supply chain. About half of the workforce at the Yeovil factory is set to work directly on the MoD contract.