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Rolls-Royce

Volume 806: debated on Wednesday 14 October 2020

Question

Asked by

To ask Her Majesty’s Government what discussions they (1) have had, and (2) propose to have, with Rolls-Royce about that company’s plans to transfer the manufacture of wide-chord fan blades to Singapore; and what steps they are taking to ensure that that company maintains advanced manufacturing jobs in the United Kingdom.

My Lords, the Government are in regular dialogue with Rolls-Royce and will continue to engage to understand what more can be done to save jobs and capabilities across the United Kingdom. The Government are supporting the aviation and aerospace sectors with around £9.5 billion in grants, loans and export guarantees over the next three years, which will help to create new, well-paid jobs for decades to come.

Do the Government understand that this is a catastrophe for high-tech manufacturing in the UK; for the retention of a skilled workforce—some of whom went to Singapore to help set up there on the promise that it would not affect their own jobs; for the critical mass of the aerospace industry of east Lancashire, with some 22,000-plus workers and four to five times as many ancillary workers; and for the future of the small north-of-England town of Barnoldswick, which locals call Barlick, which was the birthplace of the jet engine and is a genuine centre of engineering excellence? Is it not time for the Government to take more action and to take back control?

I totally understand and sympathise with the points that the noble Lord is making, but Rolls-Royce is a global company and it is having to make some very difficult decisions about its footprint everywhere as demand for its products and services has fallen significantly in the current pandemic. As I said, we are offering significant support to it and other aerospace companies.

My Lords, as has already been said, the closure of the plant at Barnoldswick and the assignment of its activities to a factory in Singapore would devastate a highly skilled workforce. I fear that it would also pose a threat to the intellectual property of the company and the nation. Will the Government take steps to ensure that that does not happen? Will they also seek to sustain the company in the face of its financial difficulties by commissioning high-tech projects that will assist the process of decarbonisation?

The noble Viscount makes a very good point. We are working closely with the company to ensure that the UK remains at the heart of its operations, and we are currently supporting the development of the next generation of engine through the ATI programme, as well as discussing longer-term possibilities around new, clean aviation technologies.

My Lords, in moving this vital skill to Singapore, Rolls-Royce was obviously responding to financial inducements. In his Answer to my noble friend, the Minister threw up his arms metaphorically and said “There’s nothing we can do. It’s the global market”. The Government had leverage and are giving support to the company. Why did the Government not tie that support to the retention of these jobs and skills in this country?

The noble Lord needs to understand the difficult environment in which Rolls-Royce is operating. Its revenues have fallen off a cliff, and we all know what has happened to the passenger jet market. It has to consolidate its operations across two sites, and that was the commercial decision it took. As I said, we are offering it extensive support and we are in regular and ongoing dialogue.

Will the Minister include trade union representation in any discussions and acknowledge the hard work put in by the two trade unions at Rolls-Royce to maintain in the UK jobs which are vital to keeping a skilled workforce and helping us to build back better?

I know my noble friend feels strongly about these matters. The unions are involved in the aerospace growth partnership, which is our main method of engaging with the UK aerospace industry, and we continue to have regular dialogues with Unite and other unions.

In the aggregated context of the retention of advanced manufacturing jobs, the pursuit of clean energy, sustainability targets, the Government’s future energy White Paper and the expertise of Rolls-Royce in small modular nuclear reactors, what plans do the Government have to help Rolls-Royce realise its potential as a key contributor to our future national energy requirements?

The noble Lord has correctly predicted that the energy White Paper will be out shortly to provide more details on these schemes. We are extensively supporting Rolls-Royce. It has received £300 million from the Covid corporate financing facility, it has made extensive use of the job retention scheme for almost 5,000 employees, and we are providing it with large amounts in R&D support from the £26.8 million in grant funding for research activities. We think Rolls-Royce is a key company for the future of the UK, and we are supporting it extensively.

My Lords, Rolls-Royce is one of the world’s premier engineering companies. Despite substantial government support, the Barnoldswick site’s workforce has been slashed from nearly 1,000 two years ago to half that today. Now, 350 more jobs are on the line, threatening the future of not just the site itself but local communities, given the impact it will have. Once highly skilled jobs are gone, they are gone. What is the Minister doing to protect those important jobs, not just for the current workforce but as an investment for the workers of the future?

As I said in previous answers, we are supporting Rolls-Royce extensively, but Covid-19 has had a devastating impact on the aerospace industry globally—Airbus and Boeing, the two largest companies, have reduced production by around 40%. We are doing all that we can to help companies such as Rolls-Royce at this difficult time—as its chief executive, to be fair, made clear when making this announcement.

My Lords, this pre-Covid decision by Rolls-Royce has an appalling effect upon the skilled workers in that company and, at the same time, on those workers who are to follow. Advanced manufacturing technology is an important part of the apprenticeship programme and apprenticeship numbers are tumbling. How are the Government going to rectify that matter and put back into place the sort of advanced manufacturing skills which the apprenticeship scheme should provide but is failing to do?

We are providing extensive support for training opportunities. I have already outlined the enormous support that we are giving to Rolls-Royce and other high-tech manufacturing facilities. I agree with the noble Lord that we need to do more in this field; we need to get more people online and more jobs in these sectors.

My Lords, the loss of these jobs to Singapore is short-sighted and a disaster for that town, the local region and the UK economy. This decision reflects the crisis facing Britain: a pandemic and an economic collapse, made worse by uncertainty over a trade deal with the European Union. Can the Minister explain further to the House what the Government’s strategy is for getting such decisions reversed, and outline how they will stop further jobs in manufacturing being lost to companies moving their operations abroad?

My Lords, when companies announce these decisions it is, of course, a difficult time for all concerned. We are in extensive dialogue with Rolls-Royce and other high-technology companies to do whatever we can, within the limits of what is possible, to retain those jobs in the United Kingdom. I have already outlined the massive and enormous support that we are giving to Rolls-Royce at this difficult time.

My Lords, in August, Rolls-Royce reported a first-quarter underlying operating loss of £1.7 billion, £1.2 billion of which was to do with civil aerospace and is Covid related. That is presumably why it has broken an agreement it had with the UK Government and moved work promised to UK workers to Singapore. Rolls-Royce is well placed, looking ahead, to provide low-carbon power solutions with the support of the UK Government—and that government support should depend on its benefit to highly-skilled UK workers. Will the Minister confirm that the Government will prioritise the work by the UK small reactor consortium—building on Rolls-Royce’s long history of providing nuclear reactors to the Royal Navy—thereby ensuring affordable nuclear power operations, and that this work will take place in the United Kingdom?

I congratulate the noble Lord on getting the Royal Navy, a matter close to his heart, into his question again. But to be serious, I agree that we need to develop the next generation of small modular reactors, and we are providing support to enable that to happen.

My Lords, I declare my interest as in the register. The East Midlands, where Rolls-Royce has its headquarters, has the lowest public sector research and development spend in the UK, at £83 per head. R&D and the skilled jobs that it generates are essential to the levelling-up agenda. What plans do the Government have to increase R&D spend in the Midlands, making the most of its strengths in the rail, aerospace, nuclear and other vital sectors?

We are happy to support good R&D projects. Rolls-Royce is a major beneficiary of our R&D support operations through the £1.95 billion Aerospace Technology Institute programme. It is also one of our largest UK investors in R&D.

My Lords, I was working for my noble friend Lord Mandelson in 2009 during a similar economic crisis when, as Secretary of State for Business, he secured assurances from Rolls-Royce that the establishment of the plant in Singapore would not lead to closure of the UK plant at Barlick or severe job losses. Given the crucial importance of Rolls-Royce to the British economy and the financial links between the Government and the company, why has the Secretary of State not made a personal intervention to save the Barlick plant?

The plant is not closing. Rolls-Royce has made it clear that it sees it having a long-term future and will continue to invest in it. However, we have to understand the context: the Covid-19 pandemic has dealt it a devastating blow. In its first half-yearly results, Rolls-Royce announced that the company’s revenue fell by 24% to £5.6 billion, while for civil aerospace, the area in which it operates, revenue fell by 37%. This is a devastating time for many companies, including Rolls-Royce. We are doing all that we can to ensure that it survives the pandemic and can go on to generate secure, well-paid jobs in the future.