HOPES that hundreds of jobs could be brought to the Valleys have been shattered.

Earlier this month US company Northrop Grumman announced it would locate in Oakdale, if it won an £800 million Ministry of Defence contract to supply a high-tech military communications system.

But the MoD said yesterday that preferred bidder status for the Watchkeeper programme had been given to the international company Thales Defence.

Defence secretary Geoff Hoon made the announcement at the Farnborough Air Show, saying it marked an important step for the "hugely significant military programme".

"Our evaluation of the two bids has been extremely thorough and we have identified Thales Defence Ltd as offering the best value for money and potential to deliver the required capability," he said.

"Negotiations will start immediately and the contract will only be let once these have been successfully concluded."

But the news will bring disappointment to those who had anticipated hundreds of new jobs for the Caerphilly county borough, if Northrop Grumman had been successful.

The company had said it would base its headquarters at Oakdale Business Park and would initially employ 250 people but with the potential for an extra 2,000 jobs if the project was successful.

Penmaen councillor John Evans said yesterday that the news was very sad for Oakdale.

"These would have been well-paid jobs, which we are now missing out on," he said.

Don Touhig, Islwyn MP and Under Secretary of State for Wales, said it was disappointing, but added that he was not "entirely despondent". "Northrop Grumman are a huge international company.

"There will be other defence contracts and they have said they were so impressed with the reception and encouragement they got in Wales that it will be their preferred location in the future," he said.

"It shows that we can attract these companies to Oakdale Business Park. "They were very impressed with the facilities and envi