BABCOCK are in dispute with the Ministry of Defence over who should stump up the money for the increasing costs of building five warships at Rosyth Dockyard.

The defence company said they had been "unable to reach agreement" with the UK Government and warned they may need up to £100 million extra to complete the order for the type 31 frigates.

Sky-high inflation and rising construction and material costs have pushed prices up and a dispute resolution process is now underway, with Babcock stating that the £1.25 billion contract will be "loss-making" if they don't receive the additional money.

A spokesperson for the company said: "We have been in dialogue with the customer about the contractual position regarding additional forecast costs resulting from certain material macroeconomic changes that were not foreseen at contract inception.

"These have led to an increase in the actual and projected programme costs to deliver the programme as planned.

"We have been unable to reach agreement with our customer as to who is responsible for the additional costs under the contract."

Babcock said the dispute resolution process was underway and may require mediation before a way forward is agreed.

The spokesperson continued: "If the contractual position remains unresolved, the lack of recovery of these additional costs would need to be reflected in the group's year end results.

"Without recovery of the additional costs, the contract would be loss-making and our preliminary assessment, subject to finalisation and audit, is that a one-off provision of between £50m and £100m would be required to cover the duration of the contract."

In November 2019 the MoD awarded a contract to Babcock to build five type 31 frigates for the Royal Navy, at an average production cost of £250m per ship.

The company spent £31.5m on a new indoor assembly hall, opened in December 2021, which allows them to build two ships at the same time.

The first of the Inspiration class frigates, HMS Venturer, is due to be structurally complete in December and construction commenced on the second ship, HMS Active, in January of this year.

The spokesperson said: "To date, we have recognised over £600m of revenue but no profit on the programme.

"Expected to conclude in 2028, the programme remains on schedule against a demanding production plan, despite the restrictions imposed by COVID-19."

The MoD declined to comment.