Two of the world’s biggest shipbuilders have pulled out of the competition to build three new support vessels for the Royal Navy in what will be seen as a blow to the Ministry of Defence’s plans to open it to international tender.

Italy’s Fincantieri and Daewoo Shipbuilding and Marine Engineering (DSME) of Korea were among five yards shortlisted in December by the MoD to compete for the £1bn contract but have now withdrawn, several people familiar with the process confirmed.

Their withdrawal leaves just three bidders: Spain’s Navantia, Japan Marine United Corporation and a consortium dubbed Team UK, comprised of Britain’s main shipbuilders, BAE Systems, Babcock International, Cammell Laird and Rolls-Royce.

Signalling the possibility of an even bigger blow to the competition, two people close to the process told the Financial Times there was a debate within Team UK about whether the consortium should stay in.

The commercial terms and conditions of the competition are understood to require bidders to put in significant funding in advance — a requirement that would help those bidders with access to government financing.

A third person, however, played down the suggestion that the consortium might withdraw.

The competition for the three Fleet Solid Support (FSS) ships has been controversial from the start with the MoD coming under fire over its decision to put the contract out to international tender amid rising fears of job losses at British shipyards.

Ministers have repeatedly insisted they are required by EU rules to procure the vessels through international competition, since they have not classified them as warships — a military category that provides an exemption from European competition regulations.

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Julian Lewis, chairman of the Commons defence select committee, has strongly criticised the decision not to use the warship classification, warning that it undermined the government’s national shipbuilding strategy, which seeks to create a steady supply of work for British yards.

Unions have said building the FSS ships in the UK could help bridge a gap in demand at yards such as Rosyth where work on the second new Royal Navy aircraft carrier is coming to an end.

The committee, which intends to question Stuart Andrew, minister for defence procuremen, on the issue at a hearing on Tuesday, has pointed out that Italy and France classify their equivalent ships as warships and follow a single-source procurement process.

A spokesman for Fincantieri confirmed the company had withdrawn from the competition, citing “a number of considerations”. He added, however, that the MoD had “asked us to consider a new set of information that is going to [be] provided in the coming days”.

“Fincantieri is waiting for such a document that will be carefully considered,” he said.

DSME was not immediately available for comment.

The MoD said it declined to “comment on speculation”. It added that the “Fleet Solid Support competition remains ongoing, with tender returns due in late July 2019”. Any decision to withdraw from the competition is a matter for each tenderer.”

At about 40,000 tonnes each, the three ships will support Britain’s aircraft carrier fleet with provisions and munitions. The final decision regarding the winning bid will be made in 2020.

Terms and conditions will be subject to change up until the contract is awarded and will be common for all bidders.

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