Britain's last independent steelmaker will work with US-based NuScale Power to develop manufacturing techniques required for the SMRs, which would be so small that they could fit on the back of a lorry.
Sheffield Forgemasters will forge a large civil nuclear reactor vessel head by the end of 2017, while US-based NuScale is providing an undisclosed sum of funding for the project ahead of its goal of having an SMR in the UK by 2020.
The government recently shortlisted engineering firm Rolls Royce, US engineering giant Bechtel, NuScale Power which is backed by US engineer Fluor, and Canada’s Terrestrial Energy and others in a competition to find the best value SMR design.
It's part of a £250m nuclear research programme unveiled in last year's Autumn Statement. Ministers believe SMRs could one day be an export leader for the UK, but they face concerns such as safety and security, financing and design approval.
Sheffield Forgemasters' chief executive, Graham Honeyman, said: "Small modular reactors could revolutionise the civil nuclear power industry, by creating more flexible power generation solutions."
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"The efficient factory manufacture of major components will be crucial to seeing them deployed cost-effectively and Sheffield Forgemasters has an unparalleled track record in the production of civil nuclear forgings of this size."
A NuScale spokesperson added: "The factory manufacture of major engineered components is central to realising the job and growth potential of SMRs across the UK and to bringing down costs through advanced manufacturing techniques."