Rolls-Royce factory, Derby

Rolls-Royce axes 4,600 jobs to save £400m

Image credit: PA

Rolls-Royce has announced that it will cut approximately 4,600 jobs in its latest restructuring, as the engineering giant aims to slash operating costs by £400m a year.

The group confirmed that the bulk of these job cuts would affect its UK workforce and would be made over the next two years, with around a third of the total made by the end of 2018. In a statement, the company said around 1,500 jobs would be lost by the end of the year, with further cuts scheduled for 2019 and 2020.

The bulk of the job cuts in the UK are set to occur across the company’s Derby site and other large production bases, such as Bristol. The company said that it could not be more specific at this stage about where exactly the jobs would go, ahead of a planned staff consultation.

These are the largest job cuts at the company since 2001, when it shed 5,000 positions, plus 1,000 contractors, amounting at the time to 12 per cent of its total workforce.

Despite the job cuts in recent years, the company said that it has also been hiring new staff to double its large engine production capacity, meaning that the net reduction in jobs since 2015 is around 600.

Worldwide, Rolls-Royce employs 55,000 people, with 26,000 based in the UK and 15,700 of those in Derby alone. The company employs around 19,400 engineers.

Following its announcement in January that it plans to slash its five operating businesses to three core units, Rolls-Royce said that this latest staff overhaul will impact support functions and management, including within engineering.

Chief executive Warren East said: “We have made progress in improving our day-to-day operations and strengthening our leadership and are now turning to reduce the complexity that often slows us down and leads to duplication of effort.

“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.”

East said that the job cuts would not affect direct staff involved in manufacturing or engineering and would instead be focused on its 33,000-strong management and support workforce. He said the number of so-called indirect staff was “too many for a business of our size”.

The company insisted that it would honour a previous pledge not to impose compulsory redundancies on union-represented staff, notably at its sites in Derby, Hucknall and Annesley.

In a statement, Rolls-Royce said that the group-wide revamp would see it shift away from operating with “overlapping activities between individual business units and a large corporate centre.

“A traditionally heavily centralised control culture will be replaced by empowered businesses, in a simpler, leaner structure with much clearer accountabilities.”

Unite union assistant general secretary Steve Turner said: "This announcement will be deeply unsettling for Rolls-Royce workers and their families and could have a dire economic impact on local communities reliant on Roll-Royce jobs.

“There is a real danger that Rolls-Royce will cut too deep and too fast with these jobs cuts, which could ultimately damage the smooth running of the company and see vital skills and experience lost.”

The restructuring will cost the company around £500m - including redundancy costs - over the next three years, but will also see it save £400m every year by the end of 2020.

Recent annual figures showed that Rolls-Royce returned to profit in 2017, with a pre-tax surplus of £4.9bn, thanks to a £2.6bn accounting boost from the recent strengthening of the pound.

However, the company and its reputation have been hit by technical issues with its engines, having uncovered durability problems with hundreds of its Package C Trent 1000 engines and a small number of its Package B Trent 1000 engines.

Shadow business secretary Rebecca Long-Bailey said: “This is deeply disturbing news for Derby. Despite making a profit of £4.9bn last year, this restructuring means over 4,000 people will lose their jobs, which is of major economic significance both locally and nationally.

“There is a real risk that redundancies of this scale will have a detrimental effect not just on the lives of workers and their families but on the future of skills in this much-needed sector and the health of the local economy."

Rolls-Royce is also reviewing its loss-making commercial marine division, which supplies equipment and vessel design across oil and gas markets.

Shares in Rolls-Royce rose 3 per cent after the restructuring announcement.

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