(Updated with additional ADS, Midlands Aerospace Alliance and Unite comment at 11:34) The cuts will fall on the £15.3bn turnover company’s civil aerospace side, not its defence business. “Our defence business, based in the UK and US, has been robust during the pandemic, with an unchanged outlook, and does not need to reduce headcount,” it stressed and continued: “As part of the reorganisation, we will ensure that our internal civil aerospace supply chain continues to support our defence programmes and explore any opportunities to move people into our Defence business.”
The headcount reduction is part of a package of measures that will see Rolls-Royce generate annualised savings of more than £1.3bn, of which the headcount reduction will contribute around £700m.
The impact of Covid-19 on Rolls-Royce and the whole of the aviation industry is “unprecedented”, the company said and added that it increasingly clear that activity in the commercial aerospace market “will take several years to return to the levels seen just a few months ago”. Sector organisation ADS has already said that delays in deliveries of new aircraft are set to cost the UK £5bn in lost value in 2020.
Warren East, Rolls-Royce, CEO said: “This is not a crisis of our making. But it is the crisis that we face and we must deal with it. Our airline customers and airframe partners are having to adapt and so must we. Being told that there is no longer a job for you is a terrible prospect and it is especially hard when all of us take so much pride in working for Rolls-Royce. But we must take difficult decisions to see our business through these unprecedented times.
“Governments across the world are doing what they can to assist businesses in the short-term, but we must respond to market conditions for the medium-term until the world of aviation is flying again at scale, and governments cannot replace sustainable customer demand that is simply not there. We have to do this right, which means we will work closely with our employee and trade union representatives as appropriate, look at any viable alternatives to mitigate the impact, consult with everyone affected and treat our people with dignity and respect.”
Consultations with appropriate employee and trade union representatives will take place, so no further details of the impact of the proposed reorganisation on specific sites, or countries, is being made at this stage.
This new restructuring is now added to the 14 June 2018 announcement that focused efforts predominantly on reducing the complexity of the company’s support and management functions. That original programme “has substantially delivered on its objectives”, Rolls-Royce added.
East concluded: “The strategic choices that we have made over the last few years have helped us to respond rapidly to Covid-19 and the synergies between our divisions leave us well placed to capitalise on the long-term potential of our markets. The world on the other side of this pandemic will need the power that we generate to fuel economic recovery. I absolutely believe the call for that power to be more sustainable will be stronger than ever. This plays to our strengths. We must ensure that we are able to continue to innovate and play our leading role in enabling the vital sectors in which we operate achieve net zero carbon emissions. We have emerged from troubled times before, to achieve incredible things. We will do so again.”
Trade union Unite called the move “shameful opportunism". Steve Turner, Unite assistant general secretary for manufacturing, said: “We will leave no stone unturned in our fight to protect skilled jobs and the backbone of our manufacturing sector.
"We will be meeting with the company over the coming days to convince them to take a different approach and pressing the government to step up to the plate to protect our manufacturing base.
“This is no time for the government to sit on the sidelines. UK manufacturing has shown that it can adapt quickly to the needs of the nation, working around the clock to produce the kit needed to protect the sick and key workers during this national crisis.Do not let this incredible national resource go to the wall.
"I repeat my calls to government: we urgently need you to work with unions and industry on a programme to take industry through the next phase of this crisis.
“Establish a National Council for Recovery* and work with us, sending a clear signal that there is a strategy to reposition UK Plc and build Britain out of this dreadful situation. That is what a nervous business community needs in order to keep investing in our jobs and communities.
"Without this plan more companies will sack more people and the mass unemployment, broken families and devastated communities that we all dread will become a stark reality.”
ADS has already called for a five-point plan to support the aerospace industry:
1. A pragmatic and proportionate plan to resume flights, working with other countries to enable travel as soon as the situation allows and protecting passengers with pre-flight checks, but avoiding the need for quarantine.
2. Extension of the Job Retention Scheme to support employees in our four sectors, which are expected to face a longer road to recovery.
3. Rapid expansion of Government support for low carbon aerospace technology, putting the UK at the forefront of the drive to develop and manufacture more sustainable aircraft.
4. An evolution of business support that unlocks finance for essential manufacturing supply chains, making sure SMEs receive effective financial support.
5. Government must pull forward public procurement to support jobs and cashflow, particularly defence and space projects.
The Midlands Aerospace Alliance is also working on a five-point plan.
*Unite says the National Council for Recovery would be a modern day National Economic Development Council (nickname ‘Neddy’) which was an economic planning forum set up in 1962 by prime minister Harold McMillan to bring together management, trades unions and government in an attempt to address Britain's economic performance
The modern version would be tripartite, cross party to develop a clear plan and strategy to recover and rebuild post –Covid-19, including transitioning to meet our wider policy and climate objectives. (Editor's note: Wikipedia says that within the European Union the United Kingdom is a member of a similar international body, namely the European Union's Economic and Social Committee.)