The Challenger 3 tanks will replace the existing Challenger 2 vehicles which have been in use since 1998.

The vehicles will be produced at the Rheinmetall BAE Systems Land (RBSL) plant in Telford, Shropshire.

Under the military restructure, announced in March, the overall number of tanks will be cut from 227.

The tank contract is part of a defence review which will see the Army's size reduced to 72,500 soldiers by 2025 as part of an increased focus on drones and cyber warfare.

The Ministry of Defence (MoD) said the Challenger 3 would be able to travel up to 60mph (97kph) with an increased range and be the UK's first fully-digitised tank.

The digital elements mean the tank will be able to share data and information on the battlefield with attack helicopters and other ground vehicles.

The contract will create 200 jobs at RBSL's plant, including 130 engineers and 70 technicians, the MoD said.

It added it would also mean 450 new supply chain jobs spread across the West Midlands, Glasgow, Newcastle upon Tyne and the Isle of Wight.

Defence Secretary Ben Wallace said the new jobs would ensure soldiers "benefit from the very best of British engineering".

He added the new technology "allows us to deliver immense warfighting capabilities in battlespaces filled with a range of enemy threats".

In the words of Ben Wallace, this announcement shows "there is a future for tanks".

There will though be fewer of them. The British Army has 227 ageing Challenger 2 tanks. Only 148 of them will be modernised and they won't be entirely new. The Challenger 3 tank will use the existing chassis, but it will have a new digital turret and smoothbore gun. It will also have a more powerful engine.

Will there be risks in bolting on new systems to the old? A similar plan to upgrade the Army's Warrior Armoured Vehicle didn't work out. That programme's now been scrapped.

Ben Wallace insists it won't happen again. He says the Challenger 3 tank will deliver the most lethal tank in Europe. It's due to come into service by the end of the decade.

In reality, designing an entirely new tank from scratch would have cost too much and taken too long. While buying a tank from another country - without creating British jobs - was clearly politically unpalatable.

Deputy Chief of the General Staff, Lt Gen Chris Tickell CBE, said: "The integration of Challenger 3 is key to ensure our success and integration in the land domain, ensuring that we meet our international commitments and continue to protect the nation."

The Army expects to receive the first Challenger 3 tanks by 2027 with the final ones due in 2030.

In November, RBSL was awarded a £860m contract to build 260 Boxer armoured vehicles for the Army.