THE soaring cost of building two transport ships at Swan Hunter could affect the yard's chance of winning work on two £4bn aircraft carriers, Tony Blair admitted yesterday.

The Prime Minister denied that the owner of yards at Tyneside and Teesside had ruled itself out of the carrier contract, but he said: "It is important that we make sure we impose financial discipline, and that is the reason why it has been an issue.

"They Swan Hunter should be able to bid, as every other company should be able to bid."

Mr Blair was asked about Swan Hunter at his monthly Press conference after it was revealed that the cost of building the two auxiliary ships had risen again.

The Ministry of Defence announced last week that the bill had risen by £73m - less than a year after the project was thrown an £84m lifeline by taxpayers.

That means the cost of building the Largs Bay and Lyme Bay has rocketed to more than £300m, compared with an original estimate of about £160m.

The rise led to Tory claims that the contract had been mismanaged. They also called for the MoD to explain how the bill got out of control.

John Mitchell, project manager at Swan Hunter, said last night: "We have not been told this is an issue, but we are clever enough to work out that if a client is not happy with our service, they will not necessarily come back to us.

"We have to make sure between now and the project we convince the MoD we are doing good work here.

"The aircraft carrier project is now a long, long way off. Three years ago, we had been told that as soon as we had finished work on the Largs Bay and the Lyme Bay we would go straight on to working on the aircraft carriers, but now they are another three years away. So we have to concentrate now on winning other work."

Recent speculation has suggested the carriers will be built at BAE in Barrow-in-Furness, the VT Group at Southampton, and Babcock at Rosyth - excluding Swan Hunter altogether.

Two weeks ago, Lord Drayson, the defence procurement minister, told MPs that "no contracts had been signed", adding: "We can't say whether any particular yard is in, or isn't in."

However, the minister compared putting together the project to creating a fantasy football team in which every player had to perform to a high standard.

The MoD has cancelled its end-of-year deadline for announcing which yards will build the carriers and has refused to set a new target date.

That led Durham North Labour MP Kevan Jones to warn that some shipyards could "go bust" if they had to wait much longer for a decision.