There has been speculation over the long term future of DERA and its 11 500 employees - 9 000 of whom are research scientists - since 1998 when the government's strategic defence review recommended that the agency should be privatised. However, union officials, the House of Commons select committee on defence, and the US government - which carries out joint research projects with DERA - expressed concerns about the sell-off. Their complaints led the government to commission a further report on the future of the agency.

This report - released on Tuesday - recommends that a core staff of 3000 employees should remain with the MOD to provide "in-house impartial advice". Research on chemical and biological weapons would also remain with the MOD. The UK's nuclear weapons research programme is carried out at the Atomic Weapons Establishment at Aldermaston, which is not part of DERA.

Privatising NewDERA would enable it to "grow its business and diversify the wealth of knowledge it has built up," said Geoff Hoon, the UK's defence minister. The government would also retain a "golden share" that would prevent a foreign take-over of the company. However, union officials believe that privatisation will lead to over 3000 staff redundancies. NewDERA would also face stiff competition for MOD contracts for the first time. A final announcement, including a timetable for the privatisation, will be made before the parliamentary summer recess.