Lockheed's design includes a fan to aid vertical landing

BAE Systems, Britain's biggest defence contractor, is closely linked to both the two US-led teams, which started test flights in October last year.

The two design teams have adopted radically different methods of achieving short take-off and vertical landing.

The government's decision to go ahead follows lobbying by BAE executives for ministers to press for guarantees about the involvement of British firms which is thought to have secured last-minute concessions from the Americans.

Some companies have already invested millions of pounds in the hope of winning a contract and the government's decision should create or safeguard 5,000 jobs in the UK.

Prototypes

The UK Government has already spent �120m on development costs.

The �1.3bn announced by the Ministry of Defence on Wednesday will only buy a few prototypes, but will help the UK have a say in the design and the distribution of work to UK factories.

The defence procurement minister, Baroness Symons, signed a formal memorandum of understanding in Washington giving Britain a say in which of the two rival bids is chosen.

Suggestions that some aircraft could be produced at BAE's Warton plant in Lancashire will be discussed at a later date.