Britain says aircraft carrier project to go ahead

LONDON, June 29 (Reuters) - Partners in a consortium to build Britain's biggest-ever warships on Monday played down reports that cost overruns could threaten the project.

The BBC reported the cost of building the two new aircraft carriers is now expected to rise to about 5 billion pounds ($8 billion) from 3.9 billion and hundreds of jobs could be lost in a bid to keep costs down, citing an internal Ministry of Defence memo.

BAE Systems (BAES.L), VT Group (VTG.L), Babcock International (BAB.L) and Thales (TCFP.PA) are in the consortium involved in the project, which has been delayed by up to two years to counter rising equipment bills. [ID:nLB736200]

Defence Equipment Minister Quentin Davies said on Monday the programme would go ahead.

"There is no question about that at all. We are going to deliver on the carrier programme," he said on BBC News.

The MoD said in a statement it was currently re-costing the programme with an initial estimate to be published next month.

"The MoD took the decision to delay the two future aircraft carriers in December 2008. We acknowledged at the time that there would be a cost increase as a result," a representative said.

BAE, VT and Babcock all said the cost overruns were expected when the government took the decision to delay the programme.

"It was always clear that this change to the delivery of the ships, announced in March, would lead to an overall increase in costs," a BAE spokesman said.