Rolls-Royce share price soars as firm says 4,600 job cuts will lead to £400m in savings

Derby MP criticises decrements as 'failure of shareholder capitalism'

The company is refocusing its business on civil aerospace, defence and power systems (PA)

Engine maker Rolls-Royce said on Friday that its plans to cut 4,600 jobs will lead to savings of £400m per year by 2020, sending shares up 13 per cent in early trading.

The company announced the role reductions, which will mainly affect UK workers, earlier this week. Around one third of the cuts will take effect by the end of this year, with the remainder to follow by mid-2020.

Rolls-Royce said the total cash cost of the restructuring is expected to be £500m, with full year net cost savings expected to reach £400m per annum by the end of 2020. The company said this would allow it to exceed free cash flow of £1bn by that date.

Chief executive Warren East said: “It is never an easy decision to reduce our workforce, but we must create a commercial organisation that is as world-leading as our technologies.”

Unite the union criticised the engineering firm’s plans and said the cuts were “too deep and too fast”.

Unite’s assistant general secretary, Steve Turner, said the job losses “could have a dire economic impact on local communities reliant on Roll-Royce jobs”.

“There is a real danger that Rolls-Royce will cut too deep and too fast with these jobs cuts, which could ultimately damage the smooth running of the company and see vital skills and experience lost,” he added.

“Unite will be offering our members maximum support through this process and seeking assurances on no compulsory redundancies from Rolls-Royce for Unite members affected by this announcement.”

Margaret Beckett, MP, raised an emergency question in parliament on Thursday seeking a statement from the business secretary on the cuts.

Greg Clark, MP, said the government was supportive of Rolls-Royce as “one of [the UK’s] most important companies”.

“It is important to emphasise that the aerospace sector is characterised by growth,” he added. “The proposed redundancies at Rolls-Royce – I make no bones about it – are clearly devastating news for those who may be affected, but overall, aerospace, including Rolls-Royce in this country, is enjoying higher order books.”

Chris Williamson, Labour MP for Derby North, where Rolls-Royce is based, said the decision to cut 4,600 jobs at a time when order books are expanding was “a failure of shareholder capitalism, which basically sacrifices jobs on the altar of higher shareholder dividends”.