Rolls-Royce confirms 4,600 job cuts in restructuring to save £400m

Rebecca Smith
Rolls-Royce has been drumming up cost-cutting plans under boss Warren East
Rolls-Royce has been drumming up cost-cutting plans under boss Warren East (Source: Getty)

Rolls-Royce has announced a £500m restructuring that will see around 4,600 job cuts, which it said will deliver cost savings of around £400m per year by the end of 2020.

Around a third of the roles are expected to leave by the end of the year, with the company saying the programme will gather "further momentum" through 2019, with full implementation of headcount reductions and the structural overhaul by mid-2020.

The company said it expects the total cash cost of the restructuring to come in at £500m, which will include the cost of redundancies and the systems investments needed for the programme. They will be incurred across 2018, 2019 and 2020.

Shares in the company rose nearly three per cent in early trading on the news.

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Rolls-Royce isn't expecting any disruption for customers during the restructuring process, and said it should not lead to any reduction in the skills and capabilities required for its current batch of programmes.

The company also pledged to honour previous commitments for no compulsory redundancies of represented staff, including those made in Derby, Hucknall and Annesley.

The news follows an announcement at the beginning of the year that Rolls-Royce would simplify the group into three business units, reducing management layers and aiming to slash complexity.

Today, the company said it will be "significantly reducing" the size of its corporate centre to remove duplication, as it looks to become a leaner organisation.

Middle managers and back-office staff are expected to account for a large number of the cuts, affecting the company's Derby base.

Chief executive Warren East said the move came as Rolls-Royce switches up how it works.

He said:

Our world-leading technology gives Rolls-Royce the potential to generate significant profitable growth. The creation of a more streamlined organisation with pace and simplicity at its heart will enable us to deliver on that promise, generating higher returns while being able to invest for the future.

It is never an easy decision to reduce our workforce, but we must create a commercial organisation that is as world-leading as our technologies. To do this we are fundamentally changing how we work.

These changes will help us deliver over the mid and longer-term a level of free cash flow well beyond our near-term ambition of around £1bn by around 2020.

A government spokesperson said: “The government is in regular contact with Rolls-Royce on its plans to reduce its back office and support functions workforce as a result of its restructuring programme. This is clearly an uncertain time for affected employees and their families and Jobcentre Plus Rapid Response stands ready to help people back into employment as soon as possible."

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