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Rolls-Royce Gets 1 Billion-Pound U.K. Submarine Reactor Contract

June 18 (Bloomberg) -- Rolls-Royce Holdings Plc won a contract valued at 1 billion pounds ($1.6 billion) to deliver reactor cores for a new class of U.K. submarine.

Rolls-Royce will upgrade its manufacturing facility in Derby with a new site as part of the contract, the company, based in London, said in a statement today.

“What we are going to be announcing is a commitment to the major refurbishing of the plant at Rolls-Royce in Derby, which builds these core reactors -- not just for the nuclear deterrent submarines, but also for our attack submarines, the Astute class submarines,” Hammond told BBC1 Television’s Sunday Politics yesterday. “So this is sustaining a sovereign capability in the U.K., and some very high-end technical skills in the U.K. for the next 40 or 50 years.”

The decision to press ahead with the plans may increase tensions in the coalition government. During the 2010 general election, the Liberal Democrats, the junior partner in the coalition, called for Trident to be replaced with a cheaper, land-based missile system.

Since Prime Minister David Cameron’s Conservative-led government took power two years ago, it’s been looking for ways to eliminate a 38 billion-pound defense shortfall built up under the previous Labour administration. Cost-cutting has included reductions in armed-forces manpower as well as the cancellation of some equipment programs.

Plugging Gaps

Hammond said last month that he’s plugged those gaps and that the armed forces will have 152 billion pounds to spend on new equipment over 10 years. Menzies Campbell, former Liberal Democrat leader, told the BBC the plans are sensible, playing down that there may be a rift in the coalition.

A decision to build the subs “won’t have to be taken until 2016 and what we’re doing at the moment is ordering the things that have to be ordered now to give us that option,” Hammond said.

The vessels, which will replace the current Vanguard class of Trident missile-bearing submarine, will enter service in 2028.

The new specification calls for longer-lasting submarines, with the aim of keeping the U.K.’s nuclear deterrent active into the 2060s. The Royal Navy has had submarines carrying nuclear missiles at sea for 40 years.

To contact the reporter on this story: Gonzalo Vina in London at gvina@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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