Rolls-Royce May Shift £1.6 Trillion Jet Engine Project to US or Germany
Rolls-Royce is considering moving a multitrillion-pound jet engine program to the United States or Germany, a shift that would deal a significant blow to the UK’s manufacturing sector and Labour’s industrial growth strategy.
The FTSE 100 aerospace group is being actively courted by political leaders in Washington and Berlin as it evaluates where to base development of a new narrow-body jet engine range—an industry segment worth an estimated £1.6 trillion globally. The project could create up to 40,000 jobs across Rolls-Royce and its wider supply chain.
The Derby-based manufacturer is seeking substantial financial support from the UK government, arguing that high domestic energy costs and the scale of investment required make it increasingly difficult to compete with lower-cost markets. Insiders say the company needs hundreds of millions of pounds in backing to keep the program in Britain, where soaring energy prices—partly attributed to the country’s Net Zero transition—have put manufacturing under pressure.
Without this support, Rolls-Royce may opt to develop the engines in Germany or the US, both of which offer cheaper energy and host existing Rolls-Royce production sites. According to internal estimates, the new engine program requires around £3 billion in research and development spending but could generate more than £100 billion in economic value for the UK if built domestically.
Chief executive Tufan Erginbilgic is said to prefer basing the program in Britain, where he has led a major turnaround of the engineering giant. However, sources familiar with the discussions note there are “plenty of options” outside the UK should government funding fall short.
Losing the project would be viewed as another setback for the UK’s manufacturing sector. Recent examples include AstraZeneca cancelling a £450 million vaccine plant in Merseyside and the Channel Tunnel operator halting future UK investment amid rising taxes and regulatory uncertainty.
Labour has described narrow-body engine development as a central pillar of its industrial strategy. Rolls-Royce currently focuses on wide-body engines for long-haul aircraft such as the Airbus A350 but exited the narrow-body market a decade ago. Re-entering the segment—dominated by aircraft like the Airbus A320—would position the company within the largest, fastest-growing category of commercial aviation.
UK industry, however, continues to face some of the highest energy prices in Europe. A recent Santander report found manufacturers pay electricity rates 50 percent higher than those in Germany and France and up to four times higher than in the United States. The report criticized the long-term decline of North Sea oil and gas production, arguing that domestic energy resources could have eased the transition to renewables.
A spokesperson for the Department for Business and Trade said the UK remains one of the world’s most competitive aerospace hubs and expects Rolls-Royce to “continue to play a key role in the sector.”
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