Adds background and details in pars 2-4

LONDON, April 1 (Reuters) - Britain handed Italian defence company Leonardo LDOF.MI a 165 million pound ($213 million) contract extension on Tuesday to maintain the Royal Navy's fleet of 54 Merlin helicopters, a deal which it said would help support 1,000 jobs across the country.

Britain, which plans to boost defence spending to 2.5% of economic output by 2027, said the deal with Leonardo would help bolster national security.

"This investment demonstrates our unwavering commitment to maintaining cutting-edge defence capabilities that keep us safe, while utilising defence as an engine for economic growth,” Maria Eagle, the minister for defence procurement and industry, said in a statement.

Leonardo is the prime contractor for the maintenance, with Lockheed Martin LMT.N and Serco SRP.L appointed sub-contractors, the government said.

($1 = 0.7730 pounds)

(Reporting by Sachin Ravikumar and Ben Ezeamalu, writing by Sarah Young)

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