The race to design and build a new generation of Royal Navy frigates has been won by engineering firm Babcock.

It has been named preferred bidder for the £1.25bn contract for five Type 31 warships. The deal secures hundreds of jobs at Rosyth in Fife, where the ships will be assembled, with construction work expected to be spread between yards across the UK.

Work is to begin by the end of 2019, with the first ships delivered in 2023.

The Type 31 is a smaller, cheaper frigate than the Type 26 warships currently being built at the Upper Clyde shipyards. With a price ceiling of £250m per ship, the aim is to maintain the size of the Navy’s surface fleet and generate export orders.

Prime Minister Boris Johnson said the modular construction method would support 2,500 jobs throughout the UK. He said the UK was “a great shipbuilding nation” and that there were “all sorts of ways” in which UK naval vessels were helping the modern world.

He added: “What it delivers is high quality jobs for young people – really high-skilled jobs for young people in this country – but also massive export opportunities of vessels that not only help to keep the peace but tackle piracy, help dealing with immigration issues across the seas.”

The Babcock team’s Arrowhead 140 design beat competition from a Cammell Laird/BAE Systems consortium and a bid led by Atlas Elektronik UK. The winning consortium also includes Thales and BMT, as well as Ferguson Marine, based in Port Glasgow, and Harland and Wolff in Belfast – both of which are currently in administration.

Last month, Babcock insisted these firms’ financial difficulties would not affect its bid because its “flexible build approach” could accommodate “a range of delivery sites”.

Scotland’s Economy Secretary Derek Mackay said the awarding of the contract was “testament to the skilled workforce and expertise which we have in Scotland”. He added: “I have spoken with Babcock this morning to assure them they have the full support of the Scottish government. “Once the final details of the contract are announced, we look forward to discussions on the role that Ferguson Marine could play alongside other suppliers in Scotland.”

Unions also welcomed the announcement, with Unite saying it would secure hundreds of jobs at Rosyth “for well over a decade”. GMB Scotland said it was “excellent news”, adding that the team that put the bid together “should be congratulated”.