Russia recently unveiled its new T-14 Armata battle tank, giving new impetus to the need to upgrade the Challenger 2 to counter strategic threats.
The MOD is now taking bids from defence companies for the £700 million upgrade.
BAE Systems has proposed upgrading the tank's thermal imaging system to give it the ability to pick out targets during both the day and night.
The commanders primary sight will integrate this thermal imaging to give a 24-hour hunter/killer capability.
The gun control and fire control systems will also be upgraded in improve accuracy of the weapons.
The company also wants to completely overhaul the internal electronics and control system.
Although it has not been announced that the main gun will be changed as part of the upgrade, it is estimated it would cost £386 million to fit all operating Challenger 2 tanks with the new L55 120mm main gun.
SOURCES- Daily Mail UK, Youtube