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US defence group Northrop Grumman has pulled out of the first stage of a competition to build a new generation of satellites for UK’s armed forces, leaving just one shortlisted contender for the tender.

Northrop, one of the largest space companies in the world, had teamed up with Airbus to bid for a contract to deliver a narrowband satellite service to be used for battlefield communications.

The contract is part of the lucrative £6bn “SkyNet 6” programme to provide secure communications and data to the military. The war in Ukraine has underlined the increasing importance of instant communications, and the next generation of combat ships and fighter jets will all rely on the rapid delivery of large amounts of data. 

Northrop’s decision to withdraw leaves just one shortlisted contender — a partnership between Franco-Italian group Thales Alenia Space and Thales UK — raising questions over whether the government will go ahead with this stage of the competition. The US company was the lead contractor, with Airbus as its junior partner. 

Northrop said that “after thoroughly reviewing the invitation to negotiate for the SkyNet narrowband military satellite communications programme, the company has decided to withdraw from procurement”. 

The US company declined to comment on what the conditions were that prompted the decision.

The Ministry of Defence said: “SkyNet 6 will deliver the UK’s next generation of military satellite communications and the narrowband and wideband procurement processes are ongoing.”

Northrop added that it would continue to collaborate with Airbus on the second, larger part of the SkyNet 6 programme, to deliver a constellation of up to three wideband capable systems for more strategic communication needs. Airbus is the lead contractor on the pair’s wideband bid. The government has yet to issue the detailed terms for that contract. 

Airbus declined to comment on what it said were “commercial decisions made by other companies”.

It said it would continue to work with the MoD on the “best approach” to the narrowband contract, adding that it would “continue to work with Northrop Grumman on our ‘best of both worlds’ bid to win the future SkyNet wideband satellite system contract”. 

Northrop’s withdrawal casts doubt on the MoD’s goal for greater competition in the provision of satellite services as well as ensuring sovereign capability. 

Airbus has operated the existing SkyNet 5 network for the MoD for the past 18 years. It was awarded a contract to build the first SkyNet 6A satellite for launch in 2025 three years ago to fill the potential gap in capability before the next group of satellites is procured. 

Rival defence and space companies have been keen to break into the UK market. 

America’s Lockheed Martin and Thales Alenia Space are both in the running for the second SkyNet contract against the Airbus/Northrop partnership.

Alex Cresswell, chief executive of Thales UK, told the Financial Times in an interview last month that the company would be submitting a bid this year. The SkyNet 6 programme, he added, was a “once in a generation opportunity to change the landscape and to change the structure of the market”. 

“It will set the tone for the appetite that companies like ours have to continue to invest in the UK as a market and build industrial infrastructure.”