Rolls-Royce set to announce more than 4,000 job cuts

Aero-engine maker attempts to increase profits by losing middle-management posts

Rolls-Royce is set to announce more than 4,000 job losses this week as the aero-engine maker attempts to increase profits by cutting middle-management posts.

The chief executive, Warren East, has decided to take action after stating repeatedly that the firm has become bloated with unnecessary layers of management and duplicated roles.

The job cuts are expected to be unveiled on Friday when the firm is scheduled to update City analysts, some of whom have pencilled in a reduction of up to 10% of Rolls-Royce’s 50,000 workforce.

However, the job losses are unlikely to affect frontline engineering jobs after the company and unions agreed a deal last year to protect about 7,000 roles at plants in Derby – and Hucknall and Annesley in Nottinghamshire – as part of a £150m investment in UK aerospace facilities. Instead, areas such as finance, human resources and purchasing are expected to undergo job cuts.

Rolls-Royce – which makes engines for Boeing and Airbus aircraft, as well as for the Eurofighter Typhoon and propulsion systems for Royal Navy nuclear submarines – declined to confirm the exact number of redundancies planned.

A spokesman for the company said: “We are proposing to move to a considerably simplified staff structure, with fewer layers and greater spans of control across the group.

“We said we had retained restructuring experts … to support us with this programme. We added that we expected this programme to deliver a significant reduction in costs and assist us in improving performance across the group as a whole.”

East, who was appointed as chief executive from the microchip designer ARM almost three years ago, inherited the controls of a great British engineering name but also one that had begun to lurch from crisis to crisis.

He was forced to issue a profit warning on only his second day in the job, while historical allegations of corruption led to £671m in penalties and the company apologising in court last year, after Rolls-Royce was found to have paid millions of pounds’ worth of bribes to secure orders in six countries, including Indonesia, Russia and China.

East has pledged to increase Rolls-Royce’s profitability and generate about £1bn of free cashflow by 2020. Free cashflow is a measure of the cash available to a business after spending on core business infrastructure and it is thought vital to Rolls-Royce being able to develop new engines in the future. East has cut 5,500 jobs during his reign so far.

In January, Rolls-Royce announced a reduction in operating businesses from five to three – civil aerospace, defence and power systems - and the company had already begun cutting staff while also indicating more drastic measures were to follow.

Around the company’s results in March, East said: “In the restructuring which followed from the transformation programme we announced in 2015, then approximately 600 senior managers left the organisation and we did, in fact, achieve some simplification.

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“The reality is, however, that there is more simplification that we need to do to make ourselves truly competitive and fit for the future. And that’s why we’re embarking on this further restructuring, seeking out duplications that exist. So, we’ll have more to talk about as we get further into it.”

In a note to clients last month, analysts at the investment bank JP Morgan said: “We would not be surprised if [Rolls-Royce] announces a headcount reduction of c10%. We would not be surprised if its upfront restructuring costs were c£350-400m over [one to three] years.”

The research added that JP Morgan expected about £200m of recurring savings by 2021 because of the job cuts.


Simon Goodley

The GuardianTramp

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