LONDON: Britain's Rolls-Royce on Monday said it had signed a contract worth more than 1 billion pounds ($1.6 billion) with Britain's defence ministry to deliver reactor cores for the UK's nuclear-powered submarine fleet.

The deal includes the refit of Rolls' submarine propulsion reactor factory at Derby in central England, where Rolls plans to introduce the latest technology and manufacturing techniques, the company said.

The investment will protect 300 jobs at the factory and many others at suppliers elsewhere, sources told Reuters on Sunday.

“This demonstrates the high level of trust the Ministry of Defence has in both our technology and the expertise of our highly skilled workforce,” Jason Smith, Rolls-Royce's chief operating officer and submarines unit president said.

The deal could strain Britain's two-party coalition government, which is split over plans to replace the country's four Vanguard submarines at an estimated cost of 25 billion pounds when they retire from service in the 2020s.

Prime Minister David Cameron's Conservative Party wants a new fleet of submarines that will continue to carry the Vanguard's Trident missiles, maintaining Britain's independent nuclear capability.

Their smaller Liberal Democrat partners are pushing for cheaper and less potent alternatives, arguing that the current capability - the ability to obliterate Moscow - is an outdated hangover from the Cold War.

Britain moved a step closer to renewing its Trident nuclear weapons system last month, awarding 350 million pounds worth of contracts to design a new generation of submarines.