Bombardier is to cut more than 1,400 jobs at the UK's last remaining train manufacturing plant, in Derby, after losing a £3bn government contract to a German rival.

The Canadian engineering giant said the completion of recent orders and failure to secure a deal for the Thameslink route made a near-50% cut in its workforce "inevitable." It is shedding 983 temporary staff and 446 permanent workers at its Derby factory, a total of 1,429 jobs. A 90-day consultation will be launched.

Bombardier said it had to lose nearly half of its 3,000 staff because four out of five production lines will be idle from September once contracts for the London Underground Victoria line and the London Midland franchise are completed.

Francis Paonessa, head of Bombardier's UK passenger division, said winning the Thameslink contract would have "secured workload at this site". He added: "We regret this outcome but without new orders we cannot maintain the current level of employment and activity at Derby."

Siemens won the deal for 1,200 carriages on the trans-London Thameslink rail route last month, sparking widespread criticism from politicians and trade unions.

Unions reacted angrily to Tuesday's news of job losses. Bob Crow – from the railworkers union, the RMT – accused the government of "industrial vandalism" and said the union would fight the decision "tooth and nail".

Gerry Doherty, leader of the TSSA rail union, said the government must reverse the decision on Siemens: "No German or French government would be so foolish as to award such a vital contract to an overseas manufacturer, threatening thousands of domestic jobs. We should be equally hard-headed when it comes to preserving our own train building industry."

Shadow business secretary John Denham insisted it was "not too late" for the government to review the Thameslink contract, calling the decision a "body blow" for British manufacturing.

But transport secretary Philip Hammond told BBC Radio 4's Today programme that was "not an option".

He claimed the government had been left with little choice because of the terms of the procurement process devised by the previous Labour administration.

That was something he wanted to change for future major projects to ensure Britain was competing on a "level playing field", he added.

The transport secretary insisted the job losses were not all as a result of the Thameslink decision and said the only option was to award the contract to the highest value-for-money bid or cancel the project altogether.

But, he added, "I think we have got to look at how we manage these things for the UK in the future."

In a recent letter to Hammond, Bombardier warned that 1,200 jobs could be at risk at Derby even if it won the Thameslink contract. However, it had hoped that winning a deal for more than 1,000 carriages on the rail route would allow the company to retain many of the jobs.

In a letter to David Cameron, Labour has claimed that up to 20,000 jobs could be hit by the Thameslink decision and looming cuts at Bombardier. The train maker's manufacturing lines will grind to a halt in 2014 when it finishes a contract for London Underground trains. Future orders for the as-yet unbuilt Crossrail and High Speed Two projects are years from being tendered.

Unite has written to two cabinet ministers in an effort to have the Thameslink decision reversed. Diana Holland, assistant general secretary of the UK's largest trade union, said the move could be the "last straw" for Bombardier in the UK.

In a letter to Hammond and Vince Cable, the business secretary, she said: "It is Unite's belief that insufficient, if any, consideration was given to the social and economic implications of your department's decision," she said. "Similarly, we are confident that the business case for Bombardier is a strong one and, coupled with the need to safeguard national manufacturing, ought to have seen it awarded the contract."

The Bombardier jobs blow comes after Lloyds Banking Group said last week that it would cut 15,000 jobs and experts warned of up to 10,000 job losses on the high street as a succession of retailers including Carpetright, Thorntons, TJ Hughes and Habitat said they would close stores.