The company was handed £1.25bn from public coffers to part-fund the development of a next-generation engine for single-aisle commercial planes. The chancellor buried this giveaway in two short sentences in the stodgy middle of his speech, presumably because it would look too much like a case of corporate welfare just after he had grumbled about the £14bn extra we’ll be paying in debt interest this year. And it’s not as if Rolls is on its uppers.
The pride of Derby is the UK’s most radically improved major company of the past few years. It sits in fifth spot in the FTSE 100 index, sporting a market value of £105bn, and has enough spare cash to spend up to £9bn on share buy-backs this year. But there had been an air of inevitability about this subsidy ever since the company’s chief executive, Tufan Erginbilgiç, talked earlier this year about how he would “appreciate” financial support from the government in developing the UltraFan engine.
What he meant is that other governments would cough up if the UK didn’t. That, unfortunately, is how life works in the global aerospace business. Subsidies are a down payment on the jobs and factories that can follow.
Germany, reeling from the woes of its carmakers, would love to have a bigger slice of the hi-tech UltraFan action (and has a role in the gearboxes anyway). The US aerospace industry is a study in how generous defence contracts subsidise civil operations. Healey couldn’t ignore those facts of aerospace life.
What’s more, one can see how the possible long-term return on the £1.25bn could turn out very well. Aircraft engines are high-value products. About 80% would be exported, doing wonders for the national balance of payments.
Projections of “tens of thousands of highly skilled jobs” eventually are credible. The big “if” is that Rolls hasn’t yet got a slot on a narrow-body programme. The company exited that market a couple of decades ago; its civil aircraft side currently only supplies engines to the smaller wide-body long-haul market.
Extract — continue reading at the source.
