A WRANGLE over the long-term future of the shipbuilding industry is placing 9,500 North-East jobs in jeopardy, it emerged last night.

The Ministry of Defence (MoD) is in talks with all the country's major yards, with a view to them merging or forming a commercial alliance.

This would mean companies that at present submit rival bids for the same contracts would share out the work, effectively ending the industry's instability.

But Swan Hunter, which has yards on Teesside and Tyneside, has turned down the proposition.

Its refusal to entertain the alliance idea places a question mark over its ability to win any future Royal Navy orders, threatening 1,500 jobs at its yard, and a further 8,000 in the wider supply chain.

An industry insider said last night: "From a very early stage, Swans let it be known that they did not want to participate in the talks."

The yard is felt not to have the capability or track record to successfully bid for entire projects.

Other yards, including BAE Systems, VT and Babcock, broadly favour an alliance because it would end the cycle of boom and bust, providing sustainable shipyard jobs.

From the ministry's perspective, it would make the process of building warships cheaper and more efficient.

An MoD spokesman said: "With the previous delivery of ships for the MoD, they have almost entirely been late, run over budget, or both.

"No decision has been made on the ship build strategy. But we need a modern, efficient industry and will work with industry to achieve this."

He declined to comment on Swans' involvement in the talks.

The Northern Echo has also learned that Swan Hunter is likely to get less work than expected on two new aircraft carriers - the biggest shipbuilding project in Europe.

Swans had anticipated building one whole part, or module, of each of the carriers, bringing in about £500m and creating 1,500 jobs.

But privately the MoD does not trust Swans after it mishandled its last high-profile contract, for two Royal Fleet Auxiliary vessels.

The project ran into massive delays and huge overspend, meaning the ministry had to give the yard an extra £84m to save it from going under.

More of the £4bn contract is likely to go to three other yards - BAE Systems on the Clyde, VT Group in Portsmouth, and Babcock in Rosyth, Scotland.

The MoD spokesman said: "We have provisionally identified four yards and Swans is one. How much work it gets remains to be seen."

But an industry expert said: "It is very unlikely Swans will get an entire module. But there will still be work as other contractors will need Swans to fabricate the hulls."

Last night, the Government announced that Kellogg Brown and Root (KBR), a subsidiary of US defence company Halliburton, will manage the carrier programme as "physical integrator" - the overseer managing the integration of design, systems and construction by a range of prime and sub-contractors.

The £5m deal means KBR also takes on the risk of incurring financial penalties if the ships are delivered late.

The carriers, HMS Queen Elizabeth and HMS Prince of Wales, will be the most powerful warships built in the UK.

They are due to enter service in 2012 and 2015. Any delay in start dates could spell disaster for the region.

David Bowles, chief executive of Northern Defence Industries, said: "The irony is, the success of this programme depends on a strong supply chain to support it.

"There is a good chance that it won't be there if the carrier project is delayed, Without this business, they will inevitably be compromised."

No one was available to comment at Swan Hunter last night