Memorandum from Rolls-Royce
1. Rolls-Royce is the UK's only naval nuclear
propulsion supplier and has been so since the introduction of
nuclear powered submarines to the Royal Navy. For nearly 50 years,
Rolls-Royce has developed, designed, supplied and supported the
nuclear steam raising plant (NSRP) powering the submarine propulsion
2. Supply of the NSRP is a highly specialised
sector of the UK submarine industrial base. The 1958 Mutual Defence
Agreement, between UK and USA, constrains non-UK provision of
components and therefore the NSRP industrial base is predominantly
within the UK. Rolls-Royce subcontract spend on the NSRP (flotilla
and new build) is circa £100 million per annum, 95% of which
is in the UK.
3. Historically the demand profile of the
UK submarine programme, and therefore the NSRP demand profile,
was relatively stable until the eleven-year gap between the last
Vanguard class and the first Astute class. Delays in order placement
led to discontinuity in production and a reduction of skills throughout
the NSRP supply chain. In parallel, the civil nuclear programme
has declined in the UK and the supply base has drastically reduced.
Limited recruitment and investment has led to an ageing, reducing
infrastructure and workforce across the UK supply chain.
4. The absence of any major NSRP development
programme since the late 1980s has put pressure on sustaining
capability to develop and design new reactor plant for the UK
submarine programme. This has in turn impeded capability and opportunity
to reduce cost and improve availability.
5. RR and other defence companies rely heavily
on recruiting and training graduates and in 2005 we recruited
a total of 185. In the region of 60-70% of our graduate intake
each year are engineers and scientists and our target for 2006
is 20% up on 2005 levels.
6. Problems with the teaching of maths and
physics are well documented. A Royal Society Study comparing 1991
with 2004 showed a 34% decrease in students taking A-level physics
and a 22% decrease in students taking A-level mathematics.
7. The decline of UK nationals among the
PhD students and researchers in UK universities is also a problem
for a high R&D intensive company like Rolls-Royce. This population
is a key source of people who will develop into the deep technical
specialists needed by the Company. At present, around 50% of the
researchers in our University Technology Centres (the focus for
our collaboration with the science base) are people born and educated
outside the UK. Many of these overseas research students make
a major contribution to our activity while they are in the UK
but retention of this skill as a result of mobility is more difficult.
In addition, they are also precluded from undertaking work on
major defence projects.
These Difficulties are Exacerbated in the Nuclear
8. The severe cuts in naval nuclear R&T
programmes in the 1990's, combined with the steady reduction of
manpower and research laboratory closures in the civil nuclear
sector, have affected the long term skills base in the UK: nuclear
chemistry is one of the areas that has run down over the past
20 years. Public research in nuclear fission has dropped by 95%
(DTI spend in 1990 was c £164 million compared with £17
million in 2001) and the civil industrial R&D skills base
has fragmented and decreased from manpower of 8,500 in 1980 to
1,000 in 2004 (ie a 90% reduction).
9. The Government recognised this dilemma
in its Report of the Nuclear Skills Group (December 2002), which
concluded that the state of nuclear skills in the UK is extremely
fragile due to public under-investment and exacerbated by the
successive privatisations and reorganisations undergone by the
10. There has also been a severe reduction
in University first-degree courses in Nuclear Engineering since
the 1990s and currently other more general engineering courses
offer a very low nuclear content.
11. The decline of general investment in
naval nuclear technology, in the 1990's, occurred at the same
time as significant NSRP issues affected submarine availability.
This put pressure upon the limited flotilla R&T funding allocated
to the NSRP.
12. This continued until, in 2003, the MoD
Chief Scientific Advisor asked Professor Burdekin to investigate
the effect of these low levels of investment. He concluded that
effective management of these age related problems was required
and recommended that £25 million per annum was necessary
to establish and implement a sound proactive position against
future ageing plant issues.
13. It was also recognised that continuous
workflow was essential to the retention of the skills base. At
the time, immediate skills continuity gaps were identified in
core design and physics; and further medium-term skills gaps anticipated
in the area of safety. The MoD through the Nuclear Propulsion
Capability Study has injected more than £10 million per annum
into R&T to address immediate concerns over skills shortages.
Without this funding, it is Rolls-Royce's view that the design
and manufacturing base in the UK would rapidly decay and may impact
on the UK's ability to meet successor timescales.
14. Of Rolls-Royce's current c 930 submarines'
engineering population, around 270 are in the over 50 age group
with a further 290 in the 40-50 age group, indicating a significant
skills continuity challenge over the next decade.
15. To meet current and future workloads,
and in recognition of the demographic issues noted above, Rolls-Royce
submarine business recently conducted a recruitment campaign.
Whilst generally successful in the short term, difficulties arose
in the areas of nuclear safety/reliability and in materials stress
analysis. As predicted, individuals with good domain knowledge
are few and far between.
16. RR also supplements its workforce with
qualified subcontractors from the civil nuclear field: via managed
service agreements (with eg Serco, AMEC NNC and Atkins). The depletion
of civil nuclear skills has not only reduced the support network
available to the military programmes but should there be a future
civil nuclear generation programme, there would also be considerable
pressure on the UK's remaining skills capacity.
17. There are substantial barriers to entry
into the market for manufacture of NSRP components and systems.
These barriers include large capital investment, specialised facilities,
uncertainty of future orders, low production rates, high standards
of production and quality assurance and, finally a highly qualified
and skilled workforce.
18. Rolls-Royce, on behalf of MoD, has recently
conducted studies to assess the status of the NSRP supply base.
These studies found the supply base to be fragile and 12 components
were identified as "supply critical" now or likely to
become so before 2008. Rolls-Royce is working with MoD to mitigate
supply chain threats to current class submarines at sea (obsolescence,
spares etc), to the Astute class in build and any future classes
of submarine. The cost of securing the supply base for these 12
components is estimated at over £50 million. A typical example
is the consolidation of the manufacturing facilities for components
such as vessels, steam generators and primary circuit valves in
order to maintain an economic workload.
19. Sole or single source suppliers provide
the majority of NSRP equipment and the supply base contains some
design and manufacturing skills and capability which, in specific
cases, are retained in only two or three individuals in the UK.
20. The affordability, availability and
the sustainability of a sovereign capability relating to submarines
all feature in the DIS and MoD has recognised that it has a leading
role in a solution, which involves major rationalisation of organisations,
facilities, programmes and processes.
21. Rolls-Royce's core competence is based
on design, supply and support of nuclear steam raising plant (NSRP),
providing a "total care" capability for submarine propulsion.
We are working closely with the rest of the Submarine community
(MoD and industry) to demonstrate the potential to drive down
cost, improve availability and to help sustain UK capabilities
in this high value added, specialised area.
22. Rolls-Royce practises the partnership
principles set out in the DIS, at the Vulcan Naval Reactor Test
Establishment in Scotland where we operate and maintain the establishment
as part of a thirteen year, incentivised contract, delivering
savings to MoD. Additionally, the forthcoming Flotilla Reactor
Plant Support contract will feature a combined Rolls-Royce/MoD
team delivering reduced costs and improved plant availability
based on a philosophy of shared risk and reward. We would hope
to continue working to these principles in any future programmes.
23. A long-term view of the submarine programme
in the UK is crucial for industry to determine when and how to
24. Rolls-Royce believes that cost control
within the submarine programme is challenging and MoD recognise
this position. The challenge arises partly because there is no
planned sustainment of the programme into the future and costs
of much of the new build supply base are being borne by the Astute
25. Timescales for design and development
of improved NSRP plant and systems to meet increased availability
and safety targets are long (over 10 years) and require experienced
engineers and management.
26. Rationalisation or greater coherence
and collaboration within industryto drive improvements
and cost reductionsis harder to determine and achieve without
clarity of a forward load programme; and improvements in manufacturing
processes and facilities require to be planned into any build
programme to maximise the benefits whilst not delaying the programme.
27. Any industrial rationalisation within
the UK shipbuilding industry would need to ensure maintenance
of the nuclear skills (associated with the build, refit and disposal
of submarines) in the appropriate geographic location for those
The Consequence of a Gap in the Build Programme
28. During the 11 year gap between build
of Vanguard class and Astute class the number of manufacturers
of heavy pressure vessels in the UK declined from five to two,
and subsequently only one remains: Heavy Pressure Vessels (Rolls-Royce
29. Due to market changes in the Oil and
Gas market, the workforce at Heavy Pressure Vessels has reduced
from 650 in 1995 to approx 100 currently and is solely dependent
on MoD NSRP work. When an order gap occurred following Astute
1-3, the facility was downsized and threatened with closure. Rolls-Royce
has enabled the facility to survive but cannot guarantee continued
operation without a committed drumbeat of work.
The Impact of Another Gap in the Build Programme
30. The impact of another gap in the submarine
building programme on the supply base is dependent on the timing
and length of any gap.
31. The Submarine community and areas of
the supply base might interpret a further gap as a signal that
the principles of openness and partnering championed by the DIS
are difficult to achieve. A commitment to a longer term, funded
programme would avoid this problem.
NSRP Supply Chain and Capability
32. Rolls-Royce has two main manufacturing
facilities which are totally dedicated to supplying NSRP components.
33. Rolls-Royce estimate that a short gap
(maximum one year) in the current build programme for Astute 4
would require approx £10 million investment to ensure sustainability
of the Rolls-Royce based design and manufacturing skills and capabilities.
This does not include any costs due to the fragility of the wider
supply chain or any restart costs. A longer gap would require
progressively greater levels of investment.
34. A gap at the end of the Astute build
programme (which remains undefined) is likely to have increasing
impacts on Rolls-Royce capabilities and dedicated manufacturing
facilities. Our facility which manufactures components such as
heavy pressure vessels, control rod drive mechanisms and primary
circuit valves would be forced to operate below minimum economic
throughput with many inefficiencies which would inevitably drive
35. Progressively, investment would be required
to retain skills but facility closure would occur if sufficient
investment was not forthcoming. Again restart costs would also
36. The wider supply chain would also be
significantly impacted and it is not unlikely that other elements
of the supply chain would exit the market or face closure.
Reactor Core Factory
37. A gap at the end of the Astute build
programme would also require a substantial change in the programme
for the facility which manufactures reactor cores, including the
proposed site regeneration programme. A complete revisit of this
programme and the introduction of further skill retention initiatives
would be required.
38. In 2004, a Rolls-Royce study indicated
a one year gap in production of cores, after completion of the
current programme in 2011, would cost approx £45 million,
rising to £180 million for a five year gap. These figures
are estimates and dependent upon timing.
39. Rolls-Royce aspires to provide a Next
Generation Nuclear Propulsion Plant for the successor to the Vanguard
class submarine and low level concept work is being undertaken
with support from MoD which will help sustain a level of skill.
This will be a long term programme (15 years+) to provide the
Royal Navy with a propulsion plant fit for the 21st century. Removing
uncertainties would contribute to the successful implementation
of this long-term programme.
9 October 2006