The decision is the result of the Future Defence Supply Chain initiative (FDSCi), which was initially set up to identify a private sector supply chain provider. Following union pressure, ministers eventually agreed to allow in-house options to be examined.

But the news has been soured by the need to implement a five-year restructuring programme as part of the in-house bid, which will involve 2,000 job cuts and the closure of three out of the five main storage and distribution sites: at Stafford, Llangennech in Carmarthenshire and Longtown, Cumbria. The bid will also look at ways of finding further efficiencies in working practices and the use of plant and machinery.

Prospect, the Public and Commercial Services union (PCS) and the T&G questioned whether the cuts could be justified and warned of a damaging impact on service and delivery. The unions also warned against additional job losses announced today to cut an approximate 600 jobs across (ABRO), the explosive and storage facility at Crombie, DARA Fleetlands as well as at RAF Saxa Vord.

Prospect National Secretary Steve Jary said: "Today’s decision demonstrates that, despite the views of many in government and the MOD, civil servants are capable of adapting to change, being innovative and driving down costs. The fact that an in-house option was deemed better value for money has fully vindicated the efforts of the unions and our members."

Commenting Mark Serwotka PCS General Secretary said: "Whilst we welcome the in-house bid win we question the need to cut jobs not just in the defence supply chain initiative but in the other areas announced today. A major concern is that job losses will impact on the ability of the MOD to fulfil key functions. However what the bid win demonstrates is a recognition that the private sector doesn’t hold all the answers and we question the MOD’s continuing refusal to allow in-house bids for Defence Training and the Defence Information Infrastructure."

The T&G also gave a cautious welcome to the news that the in-house bidder had been successful but expressed concern over closures and potential compulsory redundancies.

"Today’s announcement is a sweet and sour victory. The in-house option will keep more sites and jobs than the private sector would have done," said T&G National Secretary Peter Allenson. "But the site closures and 2,000 job losses planned over a period of five years are a massive blow. The T&G will be questioning whether these cuts can be justified, especially the closures of Stafford, Llangennech and Longtown."