UK Awards Rolls Royce £9 Billion Nuclear Submarine Contract

(Bloomberg) -- The UK awarded a £9 billion ($11 billion) contract to Rolls Royce for the design and manufacture of nuclear reactors to power the nation’s submarine fleet, as Prime Minister Keir Starmer’s Labour government seeks to highlight its commitment to the country’s nuclear deterrent.

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As part of the deal, Rolls-Royce Submarines Ltd. will also supply support services to nuclear reactors for the submarines, the Ministry of Defence said on Friday in a statement. The eight-year contract - called ‘Unity’ - will create more than 1,000 jobs, as well as helping preserve an existing 4,000, it said.

Labour — under pressure from its political opponents to increase defense spending to 2.5% of gross domestic product from about 2.3% currently — is seeking to burnish its security credentials in government, having promised during last year’s election campaign that its commitment to Britain’s nuclear deterrent was “absolute.”

“National security is a foundation of our government’s plan” for the country, Defence Secretary John Healey said in a statement. “This is a clear demonstration of our commitment to the UK’s nuclear deterrent, which is our ultimate insurance policy in a more dangerous world.”

The contract is a boost to Rolls Royce, which in 2023 announced plans to nearly double the size of its submarine plant in Derby in order to ramp up production to meet the high demand from the Royal Navy and the AUKUS defense partnership between the UK, the US and Australia. Healey is due to announce the deal at the Derby factory on Friday.

“This long-term contract enables us to invest in the right skills, equipment, and facilities to play our part in protecting UK interests at home and overseas,” Rolls-Royce Submarines President Steve Carlier said in the MoD statement.

It also comes just two days after Healey said a Russia spy ship had twice entered British waters in recent weeks, and that on one occasion he’d authorized a submarine to surface nearby “to make it clear that we had been covertly monitoring its every move.”

In the run-up to the July 4 election Labour unveiled what it called a “triple-lock” commitment on the UK’s nuclear deterrent, in an effort to show Starmer had made a clean break from his predecessor, Jeremy Corbyn, a longtime opponent of nuclear weapons who as party leader was at best ambivalent in his backing of the UK’s arsenal. Starmer, by contrast, pledged to maintain the at-sea deterrent “24 hours a day, 365 days a year,” deliver all needed future upgrades to the weaponry, and build four new nuclear submarines.

--With assistance from Kate Duffy.

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