Swan Hunter shipyards will be mothballed later this year, unless an eleventh-hour deal can be struck with the Ministry of Defence (MoD).

Swans, which has yards at Port Clarence, in Middlesbrough, and Wallsend, in North Tyneside, is shedding staff as work nears completion on the second of two Royal Fleet Auxiliary (RFA) vessels.

John Mitchell, project director, said: "The workforce will shrink week by week and month by month from now, until all we have is care and maintenance on site.

"We are actively pursuing contracts in the oil and gas sectors, but it is very competitive and there are not that many contracts."

The completion date for the second RFA ship, Lyme Bay, is not until next year. But Mr Mitchell said the steel work was nearly finished.

"This is not a case of the welders all working up until the last day," he said.

The workforce has already dwindled to about 700 from a peak of 1,600. This will shrink to nothing because Swans has a gap in its order book of at least 30 months, with 2008 as the earliest possible start date for the next big contract - constructing the hulls of two aircraft carriers.

The £2.9bn carrier project is already 18 months behind schedule. Industry analysts expect the MoD will later this year announce delays to its in-service dates of 2012 and 2014.

Swans is expecting to carry out about a third of the fabrication work, taking its workforce from 700 to 3,000.

The delay also threatens a further 8,000 jobs in the wider supply chain.Talks between industry, unions and the MoD are under way to solve this by bringing forward start dates for a Royal Navy hospital ship and a fleet of oil supply ships.

The MoD said it would not rule out bringing start dates forward. But industry analysts fear that will come too late to save North-East job losses.

Mr Mitchell said: "We have a great skilled workforce both in our yard and in the region.

"Laying off all your workers and then expecting them to come back two years later is a bit much. The MoD has promised us it is looking into it, but it is getting a bit late in the day."

David Bowles, of Northern Defence Industries, which represents small businesses in the supply chain, said: "The North-East is at the heart of the British shipbuilding community.

"Any more delay in the Government's programme is going to compromise those companies and the jobs they sustain. We are interested in discussions with anybody to find a solution to this impasse.