VT Group and BAE Systems are in the final stages of negotiating the £1 billion merger of their shipbuilding assets, The Times has learned.

Integration of the shipbuilding assets, which will create a joint venture owned by the two companies, is due to be completed in about five weeks.

That will allow the Ministry of Defence (MoD) to give the official go-ahead for the Royal Navy’s £4 billion aircraft carrier project.

The MoD has made it clear that it will not award the contract to build the two carriers until there is consolidation in the shipbuilding industry.

BAE and VT have been wrangling over how to value their respective assets on the Clyde and in Portsmouth since last October.

The value of VT’s share will receive a boost in two weeks when the Trinidad & Tobago Government is expected to announce a £155 million contract for three patrol vessels.

The Times understands that negotiations between the UK and Trinidadian governments are nearly complete and that the deal should be announced imminently.

VT, formerly Vosper Thornycroft, has been in competition with Italy’s Finmeccanica for the contract but the Trinidadian Government is now thought to be committed to the British ships.

VT’s offer price lapses at the end of this month and both sides are rushing to complete the deal in time.

The valuation of VT’s Portsmouth assets will have been further helped by the £400 million contract it won from Oman last month to build a three more patrol vessels.

The negotiations over integrating the shipbuilding divisions of BAE and VT have been complicated by the question of what other assets should be included.

BAE and VT have two existing joint ventures — Fleet Service, which maintains and repairs Royal Navy ships, and Flagship, which trains Royal Navy seamen.

It is understood that Fleet Services will join the integrated shipbuilder, while Flagship will remain independent.

The MoD is pushing for the creation of a single shipbuilding company because it believes that one national champion will stand a better chance of winning export orders in the future.

It will also allow the companies to concentrate on specialist skills rather than duplicating their operations.

BAE’s yards on the Clyde, at Govan and Scotstoun, are expected to concentrate on large warships, while VT’s Portsmouth dock is becoming a world leader in smaller vessels such as the ones sold to Oman.

The MoD is using the aircraft carrier contract as a carrot to encourage the shipbuilders to merge.

The Times understands that the Treasury has now agreed to fund the carriers, which will cost between £3.6 billion and £3.9 billion.

The two carriers, which are expected to fly F35 Joint Strike Fighters, will become the flagships of the Royal Navy.

Britain’s once-dominant shipbuilding industry has been in decline since the end of the Second World War. British yards still build equipment for the oil industry and some specialist vessels, but the industry moved to countries such as South Korea and Japan in the 1960s and is unlikely to return.

British shipbuilders are pinning their hopes and ambitions on the military sector.

Combined assets

What the BAE-VT joint venture will look like:

BAE assets

-Govan shipyard on the Clyde, bought from Kvaerner in 1999 Scotstoun shipyard, also on the Clyde, opened 100 years ago and previously owned by Yarrow Shipbuilders Limited

VT assets

-Portsmouth shipyard, opened in 2003 to replace VT’s previous shipyard in Southampton. The £50 million shipyard was the first new facility built in the UK in 60 years

Joint assets

-Fleet Services repair and maintenance

Not included

-Flagship training programme for Royal Navy seamen

-ShipCo future work Four remaining Type45 destroyers (two already built), about £800 million each

-Two aircraft carriers, about £2 billion each

-Malaysian frigate contract expected by the end of this year, worth about £800 million

-Refit of old Royal Navy vessels for export

-Oman patrol ship contract for £400 million

-Trinidad & Tobago patrol ship contract for £155 million

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