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‘A crisis, but not of our making’

UK engineering has taken a serious blow with the news that Rolls-Royce is to cut over 9,000 jobs, nearly a fifth of its workforce.

Speaking to the media Warren East, the company’s CEO, said that the losses were the result of Covid-19 and while it’s not a crisis of the company’s making, “it is the crisis that we face and must deal with.”

The firm, based in Derby, is likely to shed 3,000 jobs this year, with the remaining 6,000 going in 2021. It looks like the majority of those losses will occur in the UK at its Derby facility which is focused on the company’s civil aerospace business.

Rolls-Royce not only employs thousands across its 9 sites in the UK but has a critical role to play in training engineers and supporting apprenticeships.

Unions have responded with anger and accused the company of opportunism, but while the company has furloughed over 4,000 staff and looks like it may also turn to the government’s taxpayer backed Covid corporate financing facility, which could allow it to borrow up to £1bn, it is difficult to see what else it could do, considering the circumstances.

These job losses are hardly unexpected considering the fact that airlines have cut their flying hours by over 90% and production, by the likes of Airbus and Boeing, has been cut back significantly.

Not only is there the loss of jobs but there is also the prospect that a number of the company’s factories in the UK will also face closure, as East warned that it will also be re-assessing its manufacturing footprint.

While Rolls-Royce is cutting back its civil aviation division its defence business remains robust, according to East, and would be unaffected by the cuts programme.

While the company may tap government funds it’s also likely that it will have to turn to its shareholders for more money – these cuts are part of a plan to make savings of £1.3bn, but will that be enough for a company so heavily exposed to the commercial aviation industry which is facing such uncertain times?

Many investors are now asking not just about when the sector will recover but whether it will recover at all.

Passenger numbers are down significantly and the chances of either business or holiday travel returning to pre-Covid-19 levels are remote.

Airlines around the world have announced steep job cuts and they are expected to lose £250bn in revenues in 2020.

East warned that the impact of the pandemic has been unprecedented and that it is unlikely that activity in the commercial aerospace market will return to the levels seen, just a few months ago, for several years.

Whatever the future holds, this announcement highlights the impact of Covid-19 and is a heavy blow to one of the UK's few world-class manufacturing companies.

Author
Neil Tyler

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