THE boss of the North-East yard hoping to scrap condemned US navy ships warned last night: "We'll lose millions if the ghost ships deal is scuppered."

His warning came as protestors urged Tony Blair to take the matter up with George Bush when the President visits Britain next week.

Hartlepool firm Able UK has a contract to dismantle 13 rusting former US Navy ships but the deal has been put in jeopardy after a wrangle over planning permission.

The first ship arrived at the company's Graythorp yard yesterday - and the second is due to dock today - but the Government has said two more vessels en route from the US should turn around.

The other nine - dubbed the Ghost Fleet by environmentalists - have been stopped from leaving the US Naval Reserve Fleet, in the James River, Virginia, pending a US court hearing next spring.

Although he was relieved to see the first ship dock yesterday, Able UK managing director Peter Stephenson revealed that the company stood to lose a $5.6m (£3.4m) bond if the work could not be completed.

According to accounts filed with Companies House, the company made profits of £101,328 last year.

Company lawyers argued at a High Court hearing this month that a delay in work starting would result in losses of £220,000 a week.

If the US Government decides Able can no longer honour the deal, it may also press for compensation.

Mr Stephenson said further work worth hundreds of millions of pounds, which depended on Able having a dry dock at its Graythorp yard, was also at stake.

He said: "There is a lot of money riding on it. If this doesn't go ahead, this is the end of the whole dry dock which would be a tremendous asset for the area.

"I have had inquiries for hundreds of millions of pounds worth of work, but if we do not get this then it will be the end of the refurbishment of the dry dock.

"We can't understand why this got such a high profile. There is no risk here whatsoever. We would never have brought these ships in if there was a risk."

He was backed by Hartlepool MP Peter Mandelson who accused environmentalists of misleading the public.

Mr Mandelson said: "It is becoming obvious that we have been led up the garden path by Friends of the Earth. These ships are rusty not toxic. The early Press releases put out about them were based on falsehoods not facts."

The Caloosahatchee arrived at the yard yesterday afternoon and the Canisteo is due today. The Canopus and the Compass Island are only days behind.

The Environment Agency granted permission only on Tuesday for the ships to dock under stringent condition that no work be carried out.

The permit stipulated that "no dismantling, cutting or breaking" will be permitted and the agency would be conducting daily checks.

In a separate move, a High Court judge ruled no work could be carried out on the four vessels until legal challenges by Friends of the Earth and people living near the site had been heard.

Environment Secretary Margaret Beckett has said that under international law, the four ships should not have come to Britain and they were only being allowed to stay as it would be "impracticable" for them to be returned to the US over the winter.

The two ships still in the Atlantic faced their latest setback last night when the tug towing them was refused permission to refuel in the Azores in the mid-Atlantic.

The boat strayed six nautical miles into Portuguese territorial waters around the islands and, along with the fleet, was forced away by a warship.

Opponents of the deal are calling for a public inquiry into the Government's handling of the affair.

Conservative environment spokesman Caroline Spelman urged Tony Blair to ask George Bush to take back the ships during his visit to Britain next week.

Friends of the Earth executive director Tony Juniper said he was not convinced by claims that the US fleet was no more heavily polluted than everyday shipping.

But North East Chamber of Commerce chief executive George Cowcher backed the company. He said: "It's high time that some common sense was applied with regard to this recycling contract which Able UK has won because it has world class expertise in this field."