The Hadley Park site will also benefit from an investment of £20m to improve facilities as part of the contract with Rheinmetall BAE Systems Land (RBSL) to create a fleet of 148 Challenger 3 main battle tanks for the British Army.
As well as the creation of 200 jobs in Telford, a further 450 jobs will be established throughout the wider supply chain across the West Midlands, Glasgow, Newcastle upon Tyne and the Isle of Wight as part of the contract.
The upgraded vehicle will be a network-enabled, digital main battle tank with upgraded survivability, plus world-class surveillance and target acquisition capabilities.
The programme will commence in 2021, with an expected in-service date of 2027.
Defence Secretary Ben Wallace, who visited the site in Telford yesterday to announce the contract, said: “Our intention here is to not only equip our Army with the best but to sell abroad to key allies and make sure we keep the skills here. Shropshire has a lot of engineering heritage.
"It’s time we recognise the engineering skill in the Midlands has always been there and we are going to tap into that and create opportunities for young men and women into Telford and further afield.
“This represents a huge shift in the modernisation of our land forces through the increased lethality of Challenger 3.
“This pioneering new technology allows us to deliver immense warfighting capabilities in battlespaces filled with a range of enemy threats.
“The £800 million investment will also create hundreds of highly-skilled jobs across the country ensuring our soldiers benefit from the very best of British engineering.”
The programme will also lead to a £20 million inward investment to RBSL’s Telford facility, ensuring world-class manufacturing equipment and training for employees and apprentices.
“This is a really exciting day for Telford. It will introduce contract engineering back into the Midlands,” said RBSL sales director Rory Breen.
“The investment will improve welding capabilities as well as tools, fixtures and the creation of a new test rig.
"That should effectively be done by the end of next year. In the meantime, a lot of engineering activity has started to allow us to get to a standard where we can start to manufacture.”
Wrekin MP Mark Pritchard said the new contract was a great boost for the region and believes it could lead to the creation of more jobs at the site in the future.
“This is good news for local defence manufacturing and engineering and I believe is the start of a long term expansion of the Telford site with the creation of more jobs to come in the future.
“Shropshire has become the defence engineering hub for the West Midlands and it is my ambition it will become the national hub within the next five years.
“This is a real opportunity for Shropshire’s young people, both men and women, who are good at STEM subjects to get involved with an international company on their very doorstep, which will see them grow their skills, expand their knowledge, and provide many years of service in a thriving international sector,” he added.
Deputy Chief of the General Staff, Lieutenant General Chris Tickell CBE, said: “The announcement of the Integrated Review has provided us with a huge amount of opportunity and left the Army in a good place.
"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.”
Director Land Equipment for DE&S, Major General Darren Crook added: “This is a significant step forward for Defence and UK industry as we continue to develop and modernise our fleet of land vehicles and I am looking forward to working closely with our industry partners to deliver the very best capabilities we can for the British Army.”
RBSL was launched in July 2019 as a new, UK-based, and independent joint venture business between BAE Systems and German firm, Rheinmetall Defence.