Tyneside could be building its last complete warship after it emerged yesterday that troubled shipbuilder Swan Hunter has been frozen out of key talks on the industry's future.

Swans, which employs more than 1,000 workers in Wallsend, has been left out as a rivals hold talks on forming a new industrial strategy for UK shipbuilding.

The shipbuilding sector has been struggling for years because of the inherent peaks and troughs in the sector which relies heavily on orders from the Royal Navy.

It is understood the yard has been excluded from the vital negotiations because of concerns about its financial health - meaning the warship Lyme Bay, could be the last ship to be completely built there.

The news comes just weeks after the yard was thrown an £84m lifeline by the Ministry of Defence to plug a hole in its overdue accounts.

An industry source said last night: "It's the same story as ever. For the UK to build aircraft carriers it needs the capacity of Swan Hunter but this is a yard that is struggling on its existing contracts.

"There is a problem between the end of the current contract and the start of the aircraft carriers in a few years. People are worried about the finances because Swans is a private company, 100pc owned by chairman Jap Kroese, so although they publish their accounts they are not scrutinised in the same way as public plc's are.

"As they are left out of these key talks, there is no doubt what its future is - its future is based in building parts of ships for other people and not as a producer of complete, complicated ships once their current contracts have finished."

Under current plans, the warship venture would involve BAE Systems on Clydeside, VT Group in Portsmouth and Babcock's dockyard at Rosyth, Fife. Another joint venture, between BAE Systems' yard in Cumbria, the Devonport dockyard in Plymouth and Rolls-Royce would build submarines.

Regional GMB union secretary Tom Brennan, said: "We are well aware of these developments, but so far as we are concerned we have been given categoric assurances from the Ministry of Defence that Swan Hunter is a vital player in the shipbuilding industry.

"We will be there (involved in the programme for building aircraft carriers in a few years time) in a major way in terms of providing jobs for people and if that means building the hull or doing the most labour intensive work, then I'm not disappointed by that."

Swan Hunter won a £160m contract to build the Largs Bay and Lyme Bay in 1999. But problems adapting an off-the-shelf design sent costs spiraling and when the Lyme Bay sets out on her maiden voyage in 2007 it will be around three years behind schedule.

The source said: "There is a growing realisation within the industry that Swan Hunter is very good at steel work and making modules for ships but in terms of integration and project management there is fundamental weaknesses in the businesses which have contributed to its current financial position.

"Once the second ship, the Lyme Bay, is finished that could be the last complete Tyne-built major ship ever to set sail out the area."

No-one at Swan Hunter was available for comment yesterday.