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Rachel Reeves is to approve a £1bn deal to build military helicopters in Yeovil, saving about 3,000 manufacturing jobs, according to reports.
The chancellor is expected to sign a contract with Leonardo – the Italian owner of the former Westland factory in Yeovil, Somerset – to build the new battlefield helicopters, after months of speculation as to whether the historical site would survive.
Workers had feared the company would follow through on threats to close the facility at the end of March if the government failed to place an order for new helicopters in time.
Leonardo was the only bidder for the UK’s £1bn “new medium helicopter” contract that was launched in February 2024, after the US aerospace company Lockheed Martin and Europe’s Airbus pulled out.
The new aircraft will replace the Royal Air Force’s ageing fleet of Puma helicopters, which had been in service since the 1970s. The decision to agree the contract, first reported by the Financial Times, came just before Leonardo’s offer was set to expire on Sunday.
The contract decision appeared to come after a last-minute reversal from the Treasury. A source with knowledge of the matter said that even until early Friday afternoon, it had appeared the contract would be rejected.
John Healey, the defence secretary, was even forced to cancel a trip to the Yeovil factory on Thursday, they said, amid last-minute uncertainty over whether the Treasury would approve the deal.
By Friday afternoon, Treasury officials were saying the chancellor would give it the green light. “Rachel cares about keeping the country safe and driving jobs in the UK because our security and economic growth are fundamentally connected,” one told the FT.
The Unite general secretary, Sharon Graham, said the contract was “a tremendous victory for Unite members in Yeovil and across the aerospace sector”.
She added: “However, it took way too long to get this done, and we still have to question why workers were left in the dark until the 11th hour.”
It had faced repeated delays as the Ministry of Defence tussled with a huge funding gap, which has also held up the publication of a key military spending plan that was due last year.
Manufacturers have become increasingly frustrated with the wait for the defence investment plan (DIP), which will show how the government will fund its strategic defence review, the blueprint for transforming the UK military amid growing threats from Russia and rising commitments to Nato.
An MoD spokesperson said: “The UK’s new medium helicopter programme is ongoing and no final procurement decisions have yet been made. That outcome will be confirmed in due course.”
In November, Leonardo’s chief executive, Roberto Cingolani, told investors he was negotiating with the MoD to try “to boost the collaboration with the UK government”, while in December he wrote to the defence secretary, John Healey, and threatened to scrap all investment in Britain.
At the time, Cingolani described the new medium helicopter contract as “a cornerstone” of the Italian company’s UK strategy and added: “Any delay or cancellation in the programme award … would force a re-evaluation of Leonardo’s UK presence, including investment in electronics and cybersecurity divisions.”
Leonardo declined to comment.
