Top level talks are under way to steer a £50m contract towards Swan Hunter to safeguard the shipbuilding yard and more than 600 manufacturing jobs.

Politicians , regional development agency One NorthEast and unions have met to persuade the Ministry of Defence to bring a hospital ship conversion contract to the Tyne in 2006.

And the Government response to the proposals has been "warm", sources said last night.

Swan Hunter is facing a potential two-year gap with no orders from 2006, when work is expected to finish on the second of the £240m landing ships, the Lyme Bay. The workforce has already fallen from around 1,200 to 550 in the last 12 months as work begins to dry up.

Swan's chairman Jaap Kroese previously warned that he could be forced to mothball the Wallsend yard until work begins on a £3bn aircraft carrier contract in 2008 which is expected to create up to 3,000 jobs, with Swan Hunter accounting for up to a third of the fabrication work.

But now a consortium including Mr Kroese, ONE and Nick Brown - the prospective parliamentary candidate for Newcastle East and Wallsend - have met several times over recent months to discuss the new lifeline proposal.

The plan involves converting one of the four Royal Fleet Auxiliary landing ships - currently under construction - into a floating hospital to replace the ageing RFA Argus vessel at a proposed cost of £50m. The Defence Procurement Agency has been looking to develop a new casualty vessel since the Strategic Defence Review of 2003. However, budget constraints held back plans for a new "Joint Casualty Receiving Ship" project, which was expected to have up to eight operating tables and 150 beds, compared to the two theatres and 90 beds on the existing RFA Argus.

Mr Kroese said last night: "We spoke to the Ministry of Defence last week, and it is now up to them. However we know that a new hospital vessel has been on the cards for some time."

And Mr Brown said: "It is essential that it is given a chance, and from the meetings that I have been involved in I see that a hospital ship conversion is one of the options available."

Kevin Rowan, TUC regional secretary, told The Journal: "We need to be creative when it comes to safeguarding jobs on the river. The TUC is firmly behind this." Moving military contracts to safeguard the future of shipyards is not without precedent.

The Government gave a £140m contract to build two naval vessels - the Cardigan Bay and Mounts Bay - to BAE Systems at Govan, Scotland, to keep the yard working.

A One NorthEast insider close to the negotiations said: "This is an exciting plan. There is a feeling that it has a lot of potential."

The campaign to bring the contract to the Tyne has the support of regional defence cluster group, Northern Defence Industries. A spokesman said: "NDI would welcome any move which would help to sustain shipbuilding on the Tyne."

* Also standing for election in the Newcastle East and Wallsend constituency are Norma Dias (Conservative), Martin Levy (Communist Party of Great Britain), David Ord (Liberal Democrat).

The Journal: Today's Voice of the North

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