There is no more significant company for UK manufacturing and productivity than aerospace and turbine engineer Rolls-Royce.
When it unveils full-year results this week, investors – rewarded by a 117 per cent jump in the share price over the past year and a tenfold surge over five years – will be looking at the scale of payouts.
Free cash flow is strong, and the hope is for a bigger distribution, through buybacks and dividends, than last year when Rolls returned £1.2billion to investors.
Rolls-Royce is a slow burn, but funds invested in R&D and new technology now should produce extraordinary returns in the 2030s.
Every £1 that the Government contributes to the group’s R&D spend results in a £33 of gross added value, new wealth, for the British economy.
Labour finally came through with support for Small Modular Reactors (SMRs), although the hoops through which the company had to jump were daft.
Sky’s the limit: Rolls-Royce’s latest UltraFan 30 engine could be worth £100bn in sales and could create 40,000 skilled jobs in Britain lifting engineering out of the doldrums
As Rolls-Royce waited for the green light, rivals such as NuScale Power and GE Hitachi caught up in design and technology.
The big opportunity for UK aerospace is a return of the aero-engine maker to the vast market for narrow body jets, estimated to be worth £1.2 trillion.
A Rolls comeback in this market, using its demonstrator UltraFan engine, could be worth £100billion in sales creating 40,000 skilled jobs in Britain lifting engineering out of the doldrums.
The cost of investment in the project is put at £3billion. Rolls chief executive Tufan Erginbilgic has made progress in lining up collaborations, with American engine group Pratt & Whitney, owned by defence giant RTX (the former Raytheon), seen as a likely partner.
Germany, seeking to bolster manufacturing in the face of the struggles of its motor industry, could be ready to invest.
The Government looks to be a stumbling block. Rolls-Royce is looking for up to £200million of government R&D support for the project.
Talks with the Department for Business and Trade are ongoing. Money is there and the Treasury, with its growth agenda, is thought to be on board.
There are bureaucratic obstacles. Whitehall is concerned not to be seen ‘backing winners’ at the expense of other technologies such as fusion.
There are also fears that Britain should not be seen to be favouring Rolls-Royce over other aerospace concerns, such as Airbus, with interests in the UK. If all this sounds familiar, it is. Getting SMRs off the drawing board was a massive effort.
LABOUR, faced with the opportunity of backing new vaccine investment in Liverpool for AstraZeneca, declined with disastrous consequences.
Most of the pharma group’s new investment moved to the US and China, with UK research facilities benefiting from the crumbs off the table.
On the Labour benches, supporting Rolls-Royce at a time when it is returning funds to shareholders will be seen as anathema.
Governments across the globe, including the US, sit alongside aerospace companies on R&D. If Labour fails to come forward, they will put the prospects of our leading-edge engineering group at risk.
Rolls-Royce contributed £7.4billion to UK GDP in 2024, with an estimated £4.4billion in productivity uplifts from R&D spillovers.
Trade minister Peter Kyle and his Whitehall ditherers must wake up and smell the coffee.
Predators ball
Franklin D Roosevelt’s choice of Joseph P Kennedy, a notorious short seller, as the first head of the Securities & Exchange Commission was seen as a masterstroke. It placed the fox inside the chicken coop.
The same might be said of Peter Kyle’s decision to select Douglas Gurr, after a year’s probation, as permanent chairman of the Competition and Markets Authority (CMA), accompanied by much waffle about growing the economy.
There will, however, be relief among the private equity barons and tech giants at the choice of the former boss of tax-light Amazon UK at the wheel.
In Gurr’s first year in the CMA job, on an interim basis, all 36 deals were waved through without scrutiny.
That is the first time since 2017. Gurr’s selection signals an open season for overseas predators eyeing up UK crown jewels.
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