Italian helicopter maker AgustaWestland won a £1 billion contract to supply Britain's armed forces with at least 70 helicopters starting in 2014.

"This £1 billion contract will help support some 850 jobs across the UK," Secretary of Defence Des Browne said in a written statement to parliament.

"These commitments will improve our military capability and help sustain onshore critical design engineering skills," Mr Browne said.

Britain's Defence Procurement Minister, Lord Drayson, said in a separate statement the contract would provide the Royal Navy and British Army with 70 helicopters with options for 10 more.

He said they "will be used for everything from battlefield reconnaissance, casualty evacuation and troop transport, to detecting and destroying fast naval attack craft."

They will replace the UK's current Lynx helicopters, which have been serving anti-submarine and utility roles since the early 1970s.

The ministry said the new helicopters would enter service beginning in 2014 and come equipped with improvements including more powerful engines and better defensive aids. They are expected to stay in service for 30 years.

Honeywell and Rolls-Royce through their joint venture, the Light Helicopter Turbine Engine Company (LHTEC), won a $140 million contract to power the new helicopters. AgustaWestland, a unit of Italy's Finmeccanica, also signed a partnering agreement with the Ministry of Defence to provide support services for UK military helicopters.

Finmeccanica shares were up 0.55 per cent at €16.96 by 1526 GMT. The Italian company bought out UK engineering firm GKN's 50 per cent stake in AgustaWestland in 2004.

AgustaWestland was selected in March 2005 as preferred bidder for the contract.

Its Future Lynx is set to fulfil the Land Find and Maritime (Surface) Attack elements of a wider UK helicopter replacement programme expected to be worth about £3 billion.

European aerospace firm EADS also hopes to supply helicopters to the UK.

The ministry, which oversees Europe's largest defence budget, has said it needs to balance market fairness with safeguarding British jobs and technology.

Its Defence Industrial Strategy released in December 2005 emphasised that the partnering pact to be signed with AgustaWestland would be aimed at cost-effective support arrangements for UK military helicopters but would not preclude other rotorcraft manufacturers from supplying the UK.

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