Derby MP calls for government to intervene as more than 4,000 Rolls-Royce jobs are axed

Alexandra Rogers
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Tiefensee Visits Rolls-Royce Aircraft Engine Plant
Middle managers and back-office staff are expected to account for a large number of the cuts (Source: Getty)

Labour MP Chris Williamson has called on the government to intervene in Rolls-Royce's decision to cut more than 4,000 jobs in a multimillion pound saving drive.

The MP for Derby North, the region where Rolls-Royce workers will likely be hit the hardest, said the job cuts were "a damning indictment" of the government's hands-off industrial policy.

"Currently we have private shareholders directing the fate of some of Britain's most premier firms, with total disregard for the economic needs of the country," he said. "The government has to intervene."

The aviation and car manufacturing giant announced a £500m restructuring this morning 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.

Read more: Rolls-Royce says it's gearing up to tackle more Trent 1000 engine troubles

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.

In response to the restructuring announcement, 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.

“Rolls-Royce continues to invest in its UK operations, most recently with an additional £150m in a new large engine test-bed facility in Derby, positioning it to grow further and support increased engine production to deliver on its record order book.”

MPS are due to debate the issue in parliament later this morning.

Equity analyst at Hargreaves Lansdown Nicholas Hyett said the news was "unwelcome from Warwickshire to Westminster" but that a "slimmer, more efficient Rolls-Royce was good for UK aerospace in the long run".

"New aero engines mean order books are looking healthier and the group has done well to limit the financial impact of issues relating to in-service Trent 1000 engines," he said. "Improved cash generation following the restructuring should strengthen the group’s financial position going forward, but there’s no getting away from the fact that Rolls is still a capital intensive business in a pretty competitive industry.”

AJ Bell director Russ Mould said it would not be fair to call the jobs cuts a "slash and burn" by the company's management.

“Chief executive Warren East has been arguing for some time that there is duplication of roles within the business and the company’s cash generation has consistently disappointed," he argued.

“As well as underpinning an improvement in free cash flow to £1bn by 2020, East says the announced changes will allow the business to deliver ‘well beyond’ this in the long run.”

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