The deal includes the refit of Rolls’ submarine propulsion reactor factory at Derby in central England, where Rolls plans to introduce the latest technology and manufacturing techniques, the company said.
The investment will protect 300 jobs at the factory and many others at suppliers elsewhere, sources said.
“This demonstrates the high level of trust the Ministry of Defence has in both our technology and the expertise of our highly skilled workforce,” said Jason Smith, Rolls-Royce’s chief operating officer and submarines unit president.
The UK government moved a step closer to renewing its Trident nuclear weapons system last month, awarding £350m worth of contracts to design a new generation of British submarines.
Prime Minister David Cameron has stated that his goal is to establish a new fleet of submarines to ensure Britain’s independent nuclear capability survives beyond 2028.
But the Liberal Democrats are pushing for cheaper and less potent alternatives, arguing that the current capability – the ability to obliterate Moscow – is an outdated hangover from the Cold War.
The final decision as to whether Trident will be replaced is not due to take place before 2016.
Shares in FTSE 100-listed Rolls-Royce closed up 2.1 per cent yesterday, outperforming the index.