THOUSANDS of jobs are to be created in the North-East as two engineering giants battle it out for the £2.7bn contract to build the biggest warships ever made in the UK.

Building the two aircraft carriers for the Royal Navy would create work for up to 5,000 people in shipyards on Teesside and Tyneside.

The knock-on effect would secure another 5,000 jobs as local suppliers would be used for materials and computer systems on the 300-metre long vessels.

BAE Systems has already promised some of the work to North-East ship builders Swan Hunter if it is successful in its bid. The Government is expected to make a decision in February.

Also competing is French-owned company Thales Naval, which is working with Northern Defence Industries (NDI) to secure the deal.

Regional development agency One NorthEast said last night that the region would benefit whoever won the contract as £1bn would be pumped into the local economy.

"It will be a massive boost, both economically and socially, because it will put money back in people's pockets," said a spokes-man. "It is hard to overstate the benefits for the region because it is such a big contract and this will help some of the deprived areas that have suffered so much recently."

"No one yard is big enough to take on the job itself so it will be divided up among them."

The 50,000-tonne warships will rival the US Navy's nuclear powered Nimitz and Enterprise class carriers in size. Each will be able to carry 50 vertical take-off aircraft and troop carrying helicopters.

Longer than the Houses of Parliament, they will replace the Invincible class light aircraft carrier currently in service.

Industry chiefs and MPs are keen to use the North-East's shipbuilding experience and expertise.

"We have got the skills and the slipways to do this job because we have launched the largest ships in the world from the Tees," said Stockton North MP Frank Cook.

"I am optimistic we will get work from this and if we do we will do a good job of it."

BAE Systems spokes-man Lisa Hilary-Tee said the project would kick-start the once mighty British ship building industry into looking toward the future.

Swan Hunter will benefit whichever company wins the contract, and will provide up to 1,500 jobs on Teesside, 1,000 on Tyneside while North East Maritime Offshore Cluster will secure employment for a further 2,500.

If Thales Naval is successful, the work will be done with Swan Hunters in partnership with Heerema in Hartlepool and McNulty Offshore in South Shields.

Thales Naval managing director Peter Robertson and NDI chief executive David Bowles met with hundreds of potential suppliers yesterday at Middlesbrough's Riverside Stadium to discuss their strategy for winning the contract