Navantia, the publicly-owned Spanish shipbuilder, is in talks with the UK government to improve a deal that could also rescue Harland & Wolff (H&W).

The two companies had secured a £1.6 billion (€1.9 billion) contract to build different sections of three Fleet Solid Support (FSS) supply ships for the Royal Fleet Auxiliary at their respective shipyards in Cadiz and Appledore (Devon).

Once completed, the ships were to be assembled in Belfast, but the deal went awry when H&W went into administration last October.

Discussions are underway between government representatives in Madrid and London but it is understood that the latter wants any re-negotiations to guarantee the 1,000 UK jobs involved.

Sources close to the talks have revealed that Navantia has been providing H&W with cash to support its day-to-day operations. Meanwhile the Spanish company told Sky News that success hinges on the Ministry of Defence agreeing to “more realistic” terms.

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