A £1.6 billion contract for a UK company to build three vessels for the Royal Navy has been hit by concern that some of the work will go overseas.

The order from the Ministry of Defence represents the first naval work undertaken at Harland & Wolff’s Belfast yard for the first time in 20 years.

Some of the components will be manufactured at yards at Arnish on Lewis, and Methil, Fife, which the company bought from the administrators of Burntisland Fabrications (Bifab), in February last year. Other work will go to H&W’s yard in Appledore, Devon.

The Ministry of Defence said the contract for the Royal Fleet Auxiliary will create 1,200 jobs at the UK yards.

The supply ships will serve the Royal Fleet Auxiliary, each 709ft in length. After a major £77 million refit of the main Harland & Wolff yard, production is due to start in 2025 with the first vessel delivered in 2028.

But large parts of the deal for the three FSS — or fleet solid support — vessels will go to Spain and the Cadiz yard of Harland & Wolff’s joint venture partner Navantia, the Spanish state-owned shipbuilder.

As much as 40% of the work will be handled by Navantia which will build the stern blocks of the vessels before final assembly in Belfast.

Critics had wanted the work to be awarded to a joint bid team from the UK military contractors Babcock and BAE Systems who had promised more jobs building the vessels at Rosyth.

John Wood, chief executive of Harland & Wolff, said that winning the contract represented a breakthrough against the dominant players in the sector.

“This is a historic day for British naval shipbuilding creating a third major player in the game and breaking the existing duopoly [of Babcock at Rosyth and BAE at Govan on the Clyde] who have got used to having things served up to them on a platter,” he said Wood. “It is the time for the taxpayer to be getting value for money and for vessels to be delivered on time and on budget.”

He said the contract would revitalise Belfast and Appledore and enable the yards to compete for naval refit work and commercial business such as offshore wind vessels and the cruise and ferry markets.

Earlier this week BAE Systems won a £4.2bn order from the UK government to build five more Type 26 frigates on the Clyde, supporting 1,700 jobs at Scotstoun and Govan into the next decade and creating further work in the wider supply chain.