The UK Government is to sign a bilateral defence cooperation agreement with Brazil, paving the way for a multibillion-dollar contract for BAE to supply patrol ships and frigates to the Brazilian Navy.

Under the £2.9bn potential deal, BAE will supply six patrol boats and five or six Type-26 frigates, according to the Financial Times.

The frigates, costing £300m-£400m each, are designed for use in anti-submarine warfare, land operations, command and control functions, and the protection of high-value shipping.

The six patrol boats, costing £60m-£80m each, would be used for surveillance and deterrence, search and rescue operations and in general maritime security.

The first vessels would be built in the UK and then the manufacture will be transferred to Brazil as part of the technology transfer agreement, according to BAE.