The Ministry of Defence has signed a £500m contract with a major UK arms manufacturer to develop a new supersonic missile defence system for the Royal Navy, it will announce today.

Known as "Sea Ceptor", the weapon will be able to intercept and destroy enemy missiles within a 500-mile radius, over land or sea.

According to the MoD, the Sea Ceptor will be designed to bring down multiple targets simultaneously, flying at speeds of up to Mach 3. The system will initially be deployed on frigates to replace the Sea Wolf air-defence system, when it goes out of service in 2016, and could later be adapted for use by the army and the RAF.

The contract has been awarded to the firm MBDA, a multinational group with more than 10,000 employees in the UK, France, Italy, Germany and United States.

The MoD said: "This contract will sustain around 500 jobs in MBDA and its supply chain, in key locations across the UK such as Stevenage, Filton and Lostock."

Peter Luff, minister for defence equipment, support and technology, said: "The introduction of this missile system will not only ensure that the Royal Navy will be able to continue protecting our interests wherever they may be, but is also highly significant in sustaining and developing the UK's skill in building complex weapons."

The first sea lord, Admiral Sir Mark Stanhope, added: "Investment in advanced defence technology, such as Sea Ceptor, is vital to ensure the Royal Navy's continued ability to defend the UK's interests wherever necessary."