The first of a fleet of new British warships is set to be delivered next year despite a row over £100m in cost overruns between contractors and the Ministry of Defence.

Defence company Babcock confirmed it is on track to deliver the first of five Type 31 vessels next year in spite of its dispute with the Ministry of Defence over the project’s budget.

The company warned in April that rising costs for materials and labour had seen the bill for the five warships balloon by £100m.

The contractor wants the MoD to pay for at least some of the cost overruns but so far this request has been refused and the two parties are in a dispute resolution process.

Babcock chief executive David Lockwood said the process was being conducted on friendly terms and “feels like a sensible discussion about finding a route forward on a contract that matters to both of us”.