ABU DHABI — The British government has agreed to a deal with BAE Systems to move forward on the Type 26 frigate program but has stopped short of signing a production contract.

The £859 million (US $1.3 billion) demonstration contract announced by Prime Minister David Cameron Friday Feb 20 includes investment in long-lead items and the creation of onshore test facilities.

Some 30 supply chain companies will benefit from the deal covering Rolls-Royce gas turbines, diesel generators and steering gear for the first three ships in what is currently scheduled to be a 13-strong fleet of frigates.

BAE and the Conservative-led coalition government had hoped to agree to a production deal before the end of 2014 but negotiations over risk and other issues have slowed progress. towards an agreement.

The UK Chief of Defence Materiel Bernard Gray told said in an interview with Defense News late last year that the two sides were looking at eight areas of risk, "all of which we need to get better clarity on prior to making the manufacture investment."

However, a government commitment in hard cash to the program by the Government ahead of the general election in May is a welcome move forward, though analysts said.

BAE said in a statement: "The demonstration contract builds on the initial assessment phase and takes effect from 1 April 2015, marking the next significant stage of the program to support progression towards the manufacturing phase [first metal cutting], which is expected to begin in Glasgow in 2016."

Cameron said the deal was a "substantial investment in our shipbuilding industry, safeguarding the jobs of 600 workers in Scotland and many more across the UK."

Last year, the government invested £348 million in a program with BAE to build three offshore patrol vessels in its Glasgow yards.

Visiting the Portsmouth naval base earlier this month, Chancellor George Osborne asked officials to look at the potential to build a "new complex warship every two years" as part of a new national shipbuilding strategy

The first of the 6,500-ton anti-submarine warfare frigates is scheduled to be delivered in 2022 to start replacing Type-23 warships, Gray said in the Defence News interview last year.

Concerns are being voiced by analysts and others that the size of the program might be put at risk by possible heavy defense spending cuts and a strategic defense and security review due to be decided the other side of the election

The BAE statement said it welcomed the announcement "confirming the UK Government's continued commitment to sustaining national sovereign capability to deliver complex warships to the Royal Navy."