RUMOURS that Prime Minister Tony Blair's Government has decided to send a crucial £1bn ship order overseas were denied by ministers last night.

A Ministry of Defence (MoD) decision on the contract to build and manage six roll on/roll off (roro) ferries is expected in the near future, amid rumours that German shipbuilders are undercutting their British rivals.

A month ago, it was reported that North-East shipbuilder Cammell Laird's South Tyneside yard was thought to be out of the running for the contract, which was expected to go to a German/Italian consortium.

Yesterday, there was new speculation that the Scottish yard at Govan, on the Clyde, was also out of the race.

But last night, the MoD denied that a decision had been made, and said the Government hoped to agree the contract before the end of the year.

A spokesman said: ''We are still closely analysing the bids."

He said work to build the vessels was only a part of the overall contract, which could amount to a signal that British yards might still benefit from the order, even if a continental European yard builds the ships.

Sources close to Trade Secretary and North Tyneside MP Stephen Byers last night also maintained that no final decision had been taken.

They underlined Mr Byers' desire to stand up for British yards but conceded that the contract award was ''ultimately...a decision for Defence Secretary Geoff Hoon''.

Scottish Secretary John Reid last night criticised the continuing speculation about who would get the contract.