The Government today confirmed it has agreed a deal expected to be worth £10 billion to sell 72 Eurofighter Typhoon fighters to Saudi Arabia.

The Times reported on Monday that the Saudi Defence Ministry would award BAE, the British arms manufacturer, a mutil-billion pound contract for the planes, maintenance and weaponry to replace Saudi Arabia's ageing fleet of Tornados.

The agreement will extend the UK's largest export deal for the next 25 years and could lead to BAE making another £10 billion through maintenance and upgrading contracts.

The Ministry of Defence in a statement today: "The required commercial principles have now been agreed which has initiated the purchase of Typhoon aircraft and the associated commitment to the industrial plan to be launched."

It added it had signed an understanding document with the Saudi government "intended to establish a greater partnership in modernising the Saudi Arabian armed forces".

Shares in BAE were up nearly 3 per cent or 10p at 370p in morning deals in London. To track the stock click here.

Today's agreement comes 20 years after the controversial Al Yamamah arms deal between the two countries was first signed. That deal has been worth more than £40 billion in revenues to BAE and its partners after being supplemented by further purchases of training aircraft and other equipment.

It is also significant as the proposed Saudi order of 72 aircraft is equal to 15 per cent of all the planned Eurofighters, which have been developed by Britain, Italy, Germany and Spain.

The Typhoon will replace the RAF's Jaguar and Tornado jets. Until now, only one export order has been won for the aircraft - from Austria. The 18 Austrian jets are being built in Germany.

It is understood that BAE will build the first lot of 24 Saudi Typhoons, but production of later aircraft may be shifted to Saudi Arabia. The deal should guarantee work for the 9,000 staff at BAE's Warton factory in Lancashire until about 2014.

The Saudi Finance Ministry is expected to authorise the first payment on the new agreement as early as next week.

Once the payment is confirmed, BAE will be required to make an announcement to the London Stock Exchange confirming the details. A final contract is expected by the end of the year.

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts