THE owners of Rosyth Dockyard will lose out on £800 million after the early termination of a government contract. 

Babcock International Group said a 14-year deal to decommission 12 Magnox nuclear power stations will now end after just five years. 

It will remove £800m from the group’s £20 billion order book. 

However, the annual drop in revenue will be just two per cent – £100m – for eight consecutive years from 2020-21 “which we would expect to replace in the normal course of business”. 

A statement from the group added: “This contract change is not expected to have any negative financial impacts over the next three years and we do not expect this announcement to change the financial guidance we expect to give at the group’s full year results in May.”

The £6.1 billion contract to deal with the UK’s nuclear legacy was awarded to the Cavendish Fluor Partnership (CFP), in which Babcock has a 65 per cent stake, in September 2014. 

Two of the sites are in Scotland, at Chapelcross in Dumfriesshire and Huntertson A in Ayrshire. 

Scheduled to end in 2028, the deal will now finish in August 2019 after a mutual agreement was reached with the UK’s Nuclear Decommissioning Authority (NDA). 

Babcock said the decision followed a lengthy consolidation period that “highlighted that the scope of work required at the 12 sites is now materially different in volume to that which was initially specified, and this puts the contract at risk of a legal challenge”.

NDA chief executive officer David Peattie said: “Terminating is no reflection on CFP as performance on the sites under its ownership has been strong. 

“Making progress on the ground and keeping our sites safe and secure remain our collective priorities. 

"I would like to thank CFP for its ongoing commitment, as we transition to new arrangements.”

Babcock chief executive Archie Bethel said: “We have developed a good working relationship with the NDA and we look forward to working with them, not only to bring this contract to an orderly end in two-and-a-half years’ time but also on future projects, including the completion of the decommissioning of the Magnox power stations.”

Last summer, a High Court judge ruled that the NDA wrongly awarded the contract to CFP. 

In Westminster on Monday, energy secretary Greg Clark admitted that the tender process was “flawed” and litigation claims brought by two American firms that missed out on the contract, Energy Solutions and Bechtel, had been settled. 

The NDA will pay £76.5m, plus £8.5m in costs, to Energy Solutions and £12.5m to Bechtel.