Redditch-based GKN is expected to sign a long awaited agreement with Airbus in the next couple of weeks for the purchase of part of its Filton site, near Bristol – which would safeguard hundreds of hi-tech UK aerospace jobs.

Airbus parent EADS and engineering group GKN have been in talks for some months over a deal which will see the British aeropace and engineering group take on the wing component manufacturing and assembly operation and about 1,500 former Airbus workers - about 25 per cent of the workforce.

The other 75 per cent of the Airbus operation based at Filton, with a workforce of around 4,500, forms part of its ongoing core business at the site and in the UK, along with its wing production site at Broughton, North Wales.

The Filton site is one of a number of sites across Europe that Airbus is selling as part of a wide-ranging restructuring exercise to cut costs.

Filton, manufactures wing units for a range of Airbus aircraft.

A successful deal, which still has to be ratified by the European regulatory authorities, would significantly increase GKN’s order book in its civil aerospace unit and add around 400 million pounds to annual revenues.

“The acquisition of the Filton site is a highly compelling deal,” said GKN’s chief executive Sir Kevin Smith.

“Airbus has a huge order book with a backlog of 3,600 aircraft,” he added.

He also ruled out job losses at Filton and added that talks with the Unite union had been positive.

“We’ve spent a lot of time with them and outlined our plans and the future opportunities that this deal will bring. They appear very supportive,” Sir Kevin said.

However, he sounded a note of caution over the civil aviation market generally and acknowledged that production rates for some aircraft may be delayed or even cancelled.

“With oil trading at over $100 a barrel its difficult to see how current production levels can be sustained. The civil aerospace market is likely soften next year as higher oil prices and lower passenger numbers put increased pressure on some airlines,” he said.

Both Airbus and Boeing expect a reduction of order intake, but are maintaining their current production plans as a result of strong order books. In the first six months of 2008, the two manufacturers delivered 486 aircraft.

“We’re slightly more cautious on the civil aerospace market, but its still a great place to be,” Sir Kevin said.

Earlier, GKN announced its interim figures for the six months to end-June.

These showed a five per cent rise in underlying pretax profits to £131 million.

However, rising raw material costs - especially for steel - hit profits of its Driveline and Powder Metallurgy units which saw trading profits fall by £6 million and £5 million respectively in the half.

Automotive profits were £2 million lower.

Sir Kevin said he saw US automotive markets softening further in the second half of 2008, while Europe and now Asia were also set to weaken.

The results also benefited from a net £7 million currency swing - largely on the weaker pound against the euro - while acquisitions chipped in £6 million in the half-year.

Overall, raw material costs were £28 million higher in the first six months, of which the group managed to recover some £10 million of costs. In the second half, group finance director Bill Seeger said raw material costs will likely be in the order of £50 millions, although the group is talking to its major customer over ways recover some of these sharp increases.

“We’ll be implementing price rises and surcharges for some customers and we hope to recover at least 80 per cent of the increases,” said Mr Seeger.

The two bright spots in yesterday’s numbers were the performance of the aerospace and off-highways divisions and the healthy top-line sales growth. Group sales for the period rose 17 per cent to £2.4 billion. The interim dividend is also being raised by five per cent to 4.5 pence a share.

“Against a demanding economic environment, these are a resilient set of results,” Sir Kevin said.

“While raw material costs are likely to remain high and volatile, our cost recovery measures and increased operational flexibility are expected to deliver an improved second half performance in Driveline and Powder Metallurgy. Overall, I expect the full-year figures to be in line with expectations,” he added.