With the cancellation of the P.1154 and the request from the MoA that Hawker Siddeley (as the company had become in 1963) submit a design study for a developed Kestrel for operational use by the RAF, the course was set for the aircraft that was to become the Harrier. However, the government had only sanctioned the design of a Kestrel development and the construction of a number of development aircraft; the decision on production was deferred. The RAF was far from happy with this decision - having rejected the P.1127 three years previously they now felt it was a political aeroplane that was being forced on them. Their reasons for rejecting the P.1127 remained that it was perceived to be vulnerable to supersonic MiGs over the battlefield and that its payload-range was severely limited. It was with this lukewarm commitment by government and with active hostility from the customer that Hawker Siddeley embarked on the project study to meet Air Staff Requirement 384 and specification SR.256D.

The study was quickly completed at Kingston and was submitted to the MoA and RAF in April 1965. It outlined an aircraft that was essentially a Kestrel with many of the features from the Northrop/US Army version of the P.1127, the GOR345 proposal and the version of the P.1127 offered for VAK191. Some minor aerodynamic and structural features of the P.1154 were also adopted. Called by Hawker Siddeley the Kestrel Development, the aircraft was soon renamed as the P.1127(RAF) to limit any claims by Germany and the US, who had helped fund the original Kestrel. The main changes proposed were to adopt the Pegasus 6 engine, rated at 19,000lb., with new intakes featuring 'blow in' doors to improve efficiency at low speeds. The wing featured extended tips to move the centre of lift aft in relation to the centre of gravity to enhance longitudinal stability, especially important when carrying stores. The four wing and one body stores pylons could carry a load of 4,000 lb in addition to a pair of 20 or 30mm cannon in two fuselage-mounted pods. The aircraft was re-stressed for a service life of 3,000 hours, with reconnaissance as a secondary role. No air-to-air role was specified, the RAF's Phantoms being intended to provide battlefield air defence. Potential avionics ranged from a simple gunsight and navigation computer up to a full inertial system with head-up display, based on that projected for the P.1154. Although externally similar to the Kestrel, this developed aircraft was a considerable redesign of its predecessor - a major new development for the P.1127 family.

General arrangement of the Harrier GR.1.	View of the Harrier's intake blow-in doors.

This study formed the basis of a MoA order for six development aircraft received at Kingston in mid-1965. An extremely tight schedule was set, the first flight being planned for August 1966. In order to expedite the construction of the development aircraft the first two examples retained some Kestrel features in the undercarriage and wing. Kestrel XS693 was modified with a Pegasus 6 and intake blow-in doors at Hawker Siddeley's Brough factory to gain flight experience with the engine. Allied to a last minute 'hustle' at Dunsfold these factors allowed Bill Bedford to hover the first P.1127(RAF), XV276, on the evening of August 31 1966 - just within the month specified the previous year. Development of the aircraft went ahead relatively trouble free, based on the experience already gained with the P.1127 and Kestrel. This allowed more effort to be focussed on refining the details of the design, including a further redesign of the intakes to have eight blow-in doors, rather than the previous six. This was aimed at both improving intake efficiency and to allow the adoption of more powerful Pegasus engines that were being planned at Bristol Siddeley.

Before the first aircraft had flown, the RAF had come to view the Pegasus 6 powered version as merely an interim aircraft. Indeed, in announcing the cancellation of the P.1154 and the go-ahead for the P.1127(RAF) in February 1965, Prime Minister Harold Wilson had announced that investigations were to made to see if the P.1127(RAF) could 'be boosted into something more substantial'. A year later the Minister of Defence, Denis Healey, presented the Cabinet with the results of the Defence Review that he had been undertaking since October 1964. Among such moves as the cancellation of the Royal Navy's proposed new aircraft carrier, CVA-01, the Cabinet proposed that a study be made of a developed P.1127(RAF) with a more powerful Pegasus to improve mission radius and weapon loads, while endorsing an initial order for 60 basic aircraft out of a planned total of 110 (including two-seat trainers). Healey himself had already concluded that the P.1127(RAF) should be cancelled in favour of more Phantoms and Jaguars, but the Cabinet view was that, in the wake of the cancellation of the TSR 2, such a move would be politically damaging.

The study of the 'boosted' P.1127(RAF) looked at increasing the engine's power by either adding a new fan to the Pegasus 6 core, or by the addition of low temperature (725 K) PCB to the front nozzles of the Pegasus 6. The latter was seen to be technically difficult, while the former would cost an additional £20 million. With the development of the Pegasus 6 aircraft already estimated at £60-65 million, and the need for expensive modifications to bring the first sixty aircraft up to the later engine standard, the whole programme did not seem to Healey to be cost-effective. Including production and operating costs, he believed the substitution of Phantoms and Jaguars for the P.1127(RAF) would save £130 million over ten years. When the results of the 'boosted' variant study became clear later in 1966, Healey moved for cancellation. The project was only saved by pressure from the newly created Ministry of Technology (Mintech), which had replaced the MoA, and the rising costs of the RAF Phantom programme. By December 1966 the aircraft had escaped the immediate threat of cancellation and negotiations began for the initial production order of 60 aircraft.