Rolls-Royce and UK government agree £2.5 billion programme for narrowbody jet engines

Rolls-Royce and the UK government agreed on Oct 28 to a joint 10-year, £2.5 billion (about $3.3 billion) research and technology programme for new jet engine technology. The aim is to put a Rolls-Royce engine on the next generation of narrowbody, or single-aisle, airliners. Chancellor John Healey announced the agreement in his Budget speech to Parliament.

Narrowbody jets are the biggest segment of the civil aerospace market. Rolls-Royce has been out of it since 2012, when it sold its stake in the International Aero Engines consortium to Pratt & Whitney.

The terms

The programme covers gas turbine technology for both civil and military aircraft, including an engine demonstrator project. The government describes it as jointly funded over 10 years but has not said how the cost is split. Rolls-Royce says it expects to invest significantly more than the government across the narrowbody programme.

The agreement is a framework for future support, not a grant. The government said no new grants have been awarded at this stage, and any funding still has to pass legal, value-for-money, affordability and subsidy control checks and needs agreed terms with Rolls-Royce. Rolls-Royce said the plan is subject to a final agreement being reached.

• The initial stages are expected to support 3,300 jobs at Rolls-Royce and its suppliers by the end of 2029, including in Derby and Bristol.
• Rolls-Royce estimates that a UK engine on new narrowbody jets could add £120 billion to the UK economy over the programme's lifetime.
• Rolls-Royce plans new UK sites to assemble and test the engine if planemakers choose its technology.

The engine race

Rolls-Royce says new narrowbody aircraft are expected to enter service in the mid-to-late 2030s, with planemakers choosing engine partners over the next few years ahead of possible aircraft launches around the turn of the decade. Its stated ambition is to re-enter the market in partnership with others, and it has developed its UltraFan engine technology as part of that effort, Reuters reported.

Engines for the Airbus A320 and Boeing 737 families, the market Rolls-Royce aims to return to, come from CFM International, a joint venture of GE Aerospace and Safran, and from Pratt & Whitney.

Rolls-Royce expects underlying operating profit of up to £4.9 billion in 2026, after reporting a loss in 2021, according to Reuters.

What comes next

Rolls-Royce publishes its next trading update on Nov 12. Neither side has given a date for the final agreement on terms.