BAE Systems won the contract over Italian rival Aermacchi M346, the paper said.

It did not give the value of the contract.

The British defence ministry told AFP the report was "speculative".

"The decision has yet to be taken. It's still under consideration," a ministry spokesman said.

The choice of the Hawk, which is already used by the Royal Air Force, was recommended by Defence Secretary Geoff Hoon and Industry Secretary Patricia Hewitt and other key ministers "who argued that the credibility ofthe government's defence industry policy was at stake", the paper said.

"The policy makes manufacturing capability and jobs crucial criteria for awarding military contracts and would be seen as worthless if the jet trainer contract went overseas," the paper said, adding that awarding the contract to BAE Systems would save up to 2,000 jobs at the company's Brough plant in northern England.

It said the two-seater Hawk was to be used to train pilots who will fly the Eurofighter Typoon, a fighter jet developed by Britain, Germany, Italy and Spain.

BAE Systems made an initial bid for the contract in March that was one billion pounds (1.5 billion euros, 1.6 billion dollars) higher than the estimate made by the Treasury, the British finance ministry. It subsequently agreed to accept a lower price, the Guardian said.

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