The new ship will be designed to replace the existing Type 23 frigate.

BAE Systems has been awarded a four-year contract worth £127 million to develop a new generation of Royal Navy Warships for the Ministry of Defence (MOD).

The new Type 26 combat ship, set to replace the Type 22 and Type 23 frigates, is part of the Royal Navy’s new Future Surface Combatant programme.

BAE, which will work closely with the MOD, says that up to 300 jobs could be created over the next four years and expert teams will come together in the assessment phase of the programme to consider designs, capability and operational availability of the ships.

Defence Secretary, Bob Ainsworth, said: “Planning for future defence is crucial. It is our duty to provide key equipment that will ensure the UK is properly prepared to meet its own defence needs in an ever changing world, and continue to play an important role in maintaining global security.

“Programmes like the Type 26 not only ensure the Royal Navy continues to have cutting edge capability but also sustain the industry that supports them. The commitments the MOD has made will protect skills and employment, and preserve the industrial capability needed to carry out future programmes efficiently, in a way that represents value for money.”

Managing Director of BAE Systems Surface Ships, Alan Johnston, said that not only is the contract good news for the maritime industry, but also a hugely important programme for the Royal Navy.

“Type 26 is a key component in sustaining a surface warship capability in UK industry as agreed under the Terms of Business Agreement we signed with the MOD last year. Working in close partnership with the MOD and industry will help to reduce risk and deliver better value for UK taxpayers.”

It is anticipated that the new ships could be in service as early as 2020.