"The Ministry of Defence has selected General Dynamics UK as the preferred bidder for the demonstration phase of the new Specialist Vehicle programme," the MoD said in a statement which did not specify the value of the deal.

"This will include development of Scout, the principal reconnaissance vehicle that will replace the Scimitar vehicle currently deployed in Afghanistan."

General Dynamics UK, which is the British division of US parent General Dynamics, will deliver around 600 vehicles to troops in the first stage of the programme, with the possibility of further purchases in the future.

The lion's share of the work will take place in Britain, where it will help support more than 10,000 jobs, the MoD added.

"Around 70 percent of the work on this vehicle would take place in the UK, which would ensure the creation or sustainment of over 10,000 British jobs within the armoured vehicle sector," it said.

General Dynamics UK said the deal would offer value for money for the taxpayer and would safeguard British jobs.

"The General Dynamics UK team won this competition to provide the British Army with its next generation of armoured fighting vehicles because it is the best vehicle for the British troops," said Sandy Wilson, president and managing director of General Dynamics UK.

"We offered the best possible protection for our troops, the best growth potential over the 30-year life of the vehicle, the best value for money for the British taxpayer and the best deal for the UK industrial base.

"The programme is British to its bootstraps, delivering a military off-the-shelf vehicle with British design by British engineers to the British Army while safeguarding or creating 10,600 jobs for British workers."

However, BAE Systems expressed disappointment at news that it had lost out on the prize contract.

The London-listed firm had previously stated that 500 previously-announced job losses might be avoided if it won the contract.

"BAE Systems notes the decision by the UK MoD to award preferred bidder status to General Dynamics UK," said Bob Murphy, president of BAE Systems' land and armaments operating group.

"While disappointing, today's announcement does not impact the previously stated outlook for the land and armaments business."

General Dynamics UK is based in south Wales, but also has other operations in England and Scotland.

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