LONDON (Reuters) - British defense contractor BAE Systems (BAES.L) said it would start a consultation process to lay off 1,775 ship workers across the UK and would stop all shipbuilding at Portsmouth on the south coast of England next year.
The decision, which marks the end of over 500 years of shipbuilding in Portsmouth, will also see BAE consolidate its shipbuilding operations in Glasgow, where it has two sites in Govan and Scotstoun.
The cuts will affect 940 workers in Portsmouth in 2014, as well as 835 at Filton, in south west England, and Glasgow and Rosyth in Scotland through to 2016, BAE said.
"Following detailed discussions about how best to sustain the long-term capability to deliver complex warships, BAE Systems has agreed with the UK Ministry of Defence that Glasgow would be the most effective location for the manufacture of the future Type 26 ships," it said on Wednesday.
"Under these proposals, shipbuilding operations at Portsmouth will cease in the second half of 2014," it said.
The cost of the restructuring would be borne by the MOD, it said.
BAE currently employs 3,200 people at its Glasgow shipyards and 1,200 in shipbuilding in Portsmouth, although it has a total of 4,100 employees in the English city and surrounding area.
The company, which heads a consortium that includes Babcock (BAB.L), Rolls Royce (RR.L) and Thales UK (TCFP.PA), also said it had agreed changes to the Queen Elizabeth-class aircraft carrier contract it signed with the Ministry of Defence in 2009.
This would see the consortium's fee move to a 50-50 risk share arrangement which would provide greater cost performance incentives. The maximum risk to the companies continues to be limited to the loss of their profit opportunity, it said.
It also unveiled a proposed contract for the manufacture of three offshore patrol vessels, which would help support shipbuilding until work begins on Type 26 Global Combat ships. A manufacturing contract on the Type 26 is expected to be awarded at the end of 2014.
Reporting by Brenda Goh; Editing by Rhys Jones and David Evans