Rolls-Royce closes in on engine deal which would support thousands of jobs

A government subsidy worth hundreds of millions of pounds to back Rolls-Royce’s jet engine plans could be announced in time for next week’s Budget.

The Mail understands hopes are rising that talks – which stalled earlier this year after Sir Keir Starmer was ousted as Prime Minister – could conclude within days, supporting thousands of jobs.

FTSE 100 aerospace giant Rolls-Royce is planning to re-enter the £1.6trillion market for jet engines for narrow-body aeroplanes that serve the short-haul market.

But the Government has been warned that unless it provides financial support, the firm could seek to develop the engines abroad, which would be a major blow to UK growth ambitions. 

Announcing backing for Rolls-Royce at the Budget would be a fillip for Andy Burnham’s ‘re-industrialisation’ agenda. 

The engine maker’s boss Tufan Erginbilgic – who has turned the company’s fortunes around and overseen a huge rise in its share price since taking over in 2023 – wants a decision by the end of the year.

In December, the Mail revealed Rolls was weighing up whether to develop its narrow-body engine programme in Germany or the US if the UK fails to deliver the subsidies it is asking for.

In February, Erginbilgic (pictured) urged the Government to act saying ‘the sooner the better because business is a fast-moving thing’.

Talks on a subsidy had reached an advanced stage by the summer and insiders hoped an announcement would be made at the Farnborough International Airshow in July.

But the change at the top of government – which coincided with the airshow – meant a new set of ministers needed to be convinced. Speaking at the show, Erginbilgic said talks were progressing but urged Labour to get on with making a decision.

He warned the clock was ticking as Airbus and Boeing – the world’s two major aeroplane makers – are aiming to pick engines for their next generation of narrow-body jets in two years.

‘If you want economic growth, this will transform it, this will contribute significantly without any doubt. It will transform advanced manufacturing in the UK and the supply chain,’ he said.

‘From the country’s perspective, it is a very compelling proposition and we would like to do it in the UK because of our origin.’

The financial support package being sought for the project from the Government would go towards the development and testing of a demonstrator model of Rolls’ new UltraFan engine.

Last night there was no guarantee talks would be concluded in time for the Budget.

The Financial Times reported yesterday that the Government and Rolls-Royce were closing in on a deal. Rolls-Royce and the Department for Business, Innovation, Science and Trade declined to comment.