As far back as the late 1960s while the Airbus Industrie was still a start up finalizing the design of the A300 was there a realization among the major airframe manufacturers of Europe that there would be a need for a single-aisle aircraft to replace the aging fleets of BAC One-Elevens, Tridents, and Caravelles. A multitude of designs emerged from the various companies as there was a common desire for a "European" competitor to the highly successful Douglas DC-9 and Boeing 737 airliners. By the new decade, only France and the UK had the industrial capacity and expertise in putting a such an aircraft into service, but the UK was reeling from not just the withdrawal from the Airbus consortium, but the eventual cancellation of the BAC Three-Eleven project that caused the UK to withdraw from Airbus in the first place. France was putting its weight behind the Dassault Mercure, but the devaluation of the US dollar, the increase in the price of oil following the 1973 Yom Kippur War and Arab oil embargo and the short range of the Mercure (at full payload it was barely a 1000 miles) meant that the Mercure wasn't the aircraft the airline industry wanted at the time. BAC found itself reliant on new versions of the BAC One-Eleven, the 475 and 500 variants, but even these designs were failing miserably against Boeing and McDonnell Douglas on the world market.
At the 1971 Paris Air Show BAC announced the QSTOL (Quiet Short Take Off/Landing) airliner which looked like a scaled up, wide-body version of the later BAe-146 airliner. But BAC lacked the financial capital to commit the QSTOL to production and the UK government, smarting after the cancellation of the BAC Three-Eleven and the bankruptcy of Rolls-Royce, was hesitant to fund the launch of the QSTOL and project died quietly that year. In February of the following year BAC formed a consortium with MBB of West Germany and Saab-Scania of Sweden to develop the Europlane with the realization that a joint venture was the only way to secure the financing to launch production of any new jetliner. CASA of Spain joined later than year and at the 1972 Farnborough Air Show, the Europlane was announced only to be redesigned for the 1973 Paris Air Show as a CF6/RB.211 rear twinjet with a T-tail that borrowed heavily from the BAC Three-Eleven design. But politics intervened- with MBB heavily committed to the A300 program, Aerospatiale saw the Europlane as distracting MBB from full commitment to Airbus Industrie. Eventually, the Europlane, too, died quietly.
But while the Europlane venture was active, Hawker Siddeley formed a rival team called CAST (Civil Aircraft Study Team) with VFW-Fokker and Dornier to look into a family of aircraft to compete with Europlane. CAST got off the ground in 1972 and though design studies never got as far as Europlane did, one design did emerge that was a single-aisle twin with underwing engines. At the 1974 Farnborough Air Show, the Group of Six was announced- a new consortium to replace both Europlane and CAST with both BAC and Hawker Siddeley, Aerospatiale, both Dornier and MBB, and VFW-Fokker. The Group of Six combined the work of Europlane and CAST into a new project that featured two designs- a 200 seater designated Type A and a 110+ seater designated Type B. The Type A design became the Airbus A310. With the entry of Dassault into the consortium it became the Group of Seven. The British offered new variants of the both Trident and One-Eleven and the French offered two designs, the Aerospatiale A200 and the similar looking Dassault Mercure 200 with CFM56 engines.
This attempt at the Type B from the Group of Seven ended when the French insisted upon a lead role and Dassault broke away to pursue a joint venture with McDonnell Douglas based on the Mercure 200 design. That effort also failed due to issues of design leadership between the two companies and with the nationalization of the BAC in 1977 to form British Aerospace, the new BAe, needing a new cornerstone in the commercial market, abandoned further development of versions of the One-Eleven and joined forces with Airbus that year to develop an all-new 150-seat single-aisle aircraft under the program name of JET (Joint European Transport). BAe was offered a lead role in JET with final assembly in the UK provided the British returned to Airbus Industrie. JET was made up of British Aerospace (BAe), with Airbus being represented by MBB, VFW-Fokker, and Aerospatiale. Hawker Siddeley, now part of BAe, led the design effort for JET and created JET1, a 136-seater, and JET2, a 163-seater. Both aircraft were influenced by Aerospatiale's own previous A200 design. Both designs were powered by the GE/SNECMA CFM56 engine and early on a decision was made for a fuselage diameter larger than that of the Boeing 727/737 to allow a more comfortable six-abreast seating arrangement than that of the Boeing jets. After discussion with potential airline customers, JET1 was dropped and efforts were focused on JET2.
In 1978 JET2 was formalized with BAe being responsible for lead design and final assembly in the UK and Airbus Industrie responsible for coordinating BAe's European partners. In the following year the UK returned to the Airbus consortium and curiously, the JET2 team was relocated to Toulouse, France and in 1980 JET2 was redesignated under the SA (Single Aisle) designator with SA1, SA2, and SA3 being various lengths of the JET2 design.
At the same time that JET2 was moved to Toulouse, Delta Air Lines issued its "Delta III" requirement for a 150-seater with 50% of the fuel burn of the Boeing 727 that formed the bulk of Delta's US domestic fleet. Keen to enlarge its market share in the United States, Airbus consulted with Delta on the the Delta III specifications and focused much of the SA work around Delta's requirements. This aircraft was finalized in 1984 and launched by Airbus Industrie as the A320. The UK government and the British aircraft industry unions pushed hard to have A320 final assembly moved back to the UK, but the increased financial commitment Airbus required to establish final production of the A320 in the UK met with disapproval by the British Parliament and A320 assembly remained where it is to this day at Toulouse.
Ironically Delta never ended up ordering the A320 despite its needs having shaped the A320's design significantly. Much in the same way American Airlines shaped the A300 design nearly 15 years earlier, it was only years later after the A320 program was well-established that Delta ended up operating the A320, but not as a customer but as the merger partner with Northwest Airlines in 2009 which itself had a substantial A320 fleet as well as the shorter A319.
Source: Stuck on the Drawing Board: Unbuilt British Commercial Aircraft Since 1945 by Richard Payne. Tempus Publishing, 2004, p162-175.