Royal Ordnance could close munitions plants with the loss of thousands of jobs unless the MoD pledges to pay higher prices to preserve a UK source of supply.
Ammunition plants at risk are at Chorley in Lancashire, Birtley in Durham, Glascoed in Gwent, Wolverhampton in the West Midlands and Radway Green in Cheshire.
If all 12 of the UK’s Royal Ordnance plants closed, up to 4,000 jobs could be at risk.
John Weston, chief executive of Royal Ordnance’s parent company, British Aerospace, said last week that it was talking to the Government about the possible closure of its ammunition business.
The closure threat follows a fall in orders and strong competition from cheaper foreign suppliers.
In August, BAe said it could cut 475 jobs at seven plants, including 199 at Royal Ordnance’s Nottingham arms plant.
This week, the MoD said it had a strategic interest in maintining the UK’s ammunition manufacturing capability.
‘We are in regular dialogue with Royal Ordnance over its attempts to secure a viable future for its ammunition business,’ a spokesman said.
BAe is understood to be talking to Germany’s Rheinmetall about a joint venture which would lead to UK site closures at Royal Ordnance.
Meanwhile, a propellant plant at Bishopton, near Glasgow, will be under threat if a £100m contract is awarded next month to South Africa’s Denel for the modular charge system for army AS90 self-propelled howitzers.
An MoD spokesman said restructuring decisions were a commercial matter for the companies involved.
However, he stressed that the MoD would assess the strategic implications of any site closure proposal or joint ventures with overseas firms.
‘In the latter case, the MoD would wish to look carefully at the issues of security of supply and mutual dependence,’ the spokesman said.
Weston said the MoD would have to pay higher prices for UK ammunition to preserve a guaranteed source of local supply. He added that BAe could not sustain Royal Ordnance’s plants without a higher return and their survival should not depend on domestic orders.
The MoD said: ‘Royal Ordnance’s future in this field depends on its ability to remain competitive and win business in the UK and overseas. There is worldwide overcapacity in ammunition production and the market is fiercely competitive.’