There wasn't a newer more modern type on the market at the time. P-8 & Kawasaki P-1 hadn't yet been proposed AFAIK, & neither had an A320 MPA, though I expect Airbus would have responded positively to an expression of interest.
The choices were to develop something from scratch, build an updated old design (the Lockheed P-7 was a new aircraft based on the P-3, but the USN cancelled it too soon for it to be a candidate), or refurbish some old aircraft. The RAF was offered updated P-3s, both new build & refurbished, & updated (I think new build) Atlantiques. Atlantique was quickly withdrawn, & apparently being twin-engined was a factor. The RAF wanted four. That would have counted against B737 or A320-based options.
Developing something new was rejected as too expensive IIRC, & so was building new aircraft to a modified Nimrod design, but BAE cunningly disguised a new design based on Nimrod as refurbished old airframes, & that satisfied the accountants. Behind the scenes, some technical staff at BAE rebelled, but they were shut up. The most senior one was sacked with a payoff ("early retirement") & a gagging clause. He spoke out after MRA4 was cancelled.
It looks as if the P-1 cost a lot less to develop than MRA4, despite being new. Apparently sharing components with the C-2 transport & using off the shelf parts where practical was ordered.