Rolls-Royce has decided to slash 9,000 jobs in a bid to deal with the coronavirus crisis, which has crushed manufacturing industries worldwide.
AJ Bell said: “While job cuts had been widely trailed at Rolls-Royce, the decision to lay off more than 15% of its global workforce still carries weight and highlights the damage coronavirus is doing to the company.
“Rolls is at the sharp end of the crisis given the importance of civil aerospace work to the business. A model built on maintenance and spares and repairs contracts on an installed base of engines doesn’t work when said engines are not in use and orders for the planes which take its engines have collapsed.
“Cutting that number of staff in itself will be a big effort, costing hundreds of millions of pounds and could come with political complications given most of its aerospace activities are based in the UK.
“The long-term implications of such lay-offs should not be underestimated either. If or when the aviation sector takes flight once more, Rolls might need to recruit and train a whole raft of new people, affecting the pace of its own recovery.
“Rolls doesn’t have the luxury of looking too far ahead; for now it simply needs to keep itself in the air while it tries to navigate extreme market turbulence.
“Due to a significant crossover in the skills and expertise required, many companies operate across the spectrum of defence and commercial aerospace and it sounds like Rolls will try and shift some of its aerospace capacity towards defence – a part of the group which is so far unaffected by the pandemic.”