BAE Systems in arms talks with Saudi Arabia

The deal with Saudi Arabia would be a lifeline for BAE's Eurofighter Typhoon programme

BAE Systems has disclosed it is in talks over a multi-billion-pound arms contract with Saudi Arabia.

The announcement by the defence, aerospace and electronics giant will stoke controversy over weapons sales to the Arab kingdom.

However, it will hold out a lifeline to aircraft factories in the North West.

The UK has been one of the biggest suppliers of defence equipment to Saudi Arabia for more than 40 years, including the 1980s al-Yamamah deal.

That deal - worth more than £40bn, according to former BAE chief executive Mike Turner - was credited with saving the company from a near financial crisis.

But the supply of arms has come under renewed scrutiny after Saudi Arabia's recent attacks on Yemen.

The BBC's Newsnight recently revealed that an influential select committee had compiled a draft report calling for a ban on all exports. A final report from the committee has yet to be released.

Foreign Secretary Boris Johnson has told the Commons that the government had accepted Saudi assurances that British weapons were being used in accordance with international law.

For BAE, a new Saudi deal would be an important fillip and a big step towards another contract for the Eurofighter Typhoon. Talks have been underway for more than two years over a five year deal centred on the sale of 48 Typhoon combat aircraft to Saudi Arabia.

Typhoon production in the UK - which takes places at factories in Warton in Lancashire - is slowly winding down because of a lack of export orders.

At current rates, production would cease in about five years' time. The sale of another 48 aircraft would significantly extend the factories' lives.

BAE told the Stock Exchange on Thursday: "Discussions between BAE Systems, the UK government and the Saudi Arabian government are progressing to define the scope and terms of the next five-year Saudi-British Defence Co-operation Programme."