BAE Systems PLC (LSE:BA.) will make Australia’s nuclear-powered submarines for the AUKUS programme as part of a partnership that the government said "could be worth billions of pounds", including on engines made by Rolls-Royce Holdings PLC (LSE:RR.).
Under the deal, the FTSE 100 company will work with Australian specialist submarine builder ASC, with the first boats aimed to be launched in the late 2030s.
It follows "months of negotiations" and is "a monumental success" for the British defence industry, the Ministry of Defence said in a statement. "BAE Systems have been at the heart of the UK’s submarine enterprise for generations and will bring experience and excellence to deliver this important submarine for Australia."
Elements of the supply chain were also signed off as part of the deal, including Rolls-Royce providing the nuclear propulsion plants.
UK defence secretary Grant Shapps said: "In a more dangerous world, today’s announcement symbolises the huge confidence our close partner Australia has in our world-leading defence industry, including companies such as BAE Systems and Rolls-Royce."
Australia agreed last year that it would make a significant investment into the UK’s submarine industrial base, including Rolls-Royce, Sheffield Forgemasters and their supply chains, with funding also provided by the UK MoD.
BAE chief executive Charles Woodburn said "good progress" is already being made on the design and development of the submarine in the UK, with "more than 1,000 people working on the SSN-AUKUS programme and major infrastructure investment".
Rolls-Royce submarines president Steve Carlier said the funding commitment "shows the trust Australia places on our nuclear expertise and our ability to deliver".