Rolls-Royce to invest GBP100m in UK facilities

30 April 2004

                 ROLLS-ROYCE TO INVEST £100M IN UK FACILITIES                  

Rolls-Royce, the world-leading power systems group, today confirmed the latest
phase in its transformation programme to modernise factories and drive down
costs.

The company will invest more than £100 million in aggregate in the UK over the
next two and a half years in manufacturing facilities specialising in
compression systems, combustion systems, component services and turbine
systems. This investment will ensure that Rolls-Royce operates at world-best
levels of competitiveness.

Employees in these facilities, located at Derby, Bristol, Barnoldswick in
Lancashire and Hucknall near Nottingham, have agreed to the implementation of
modern working practices to support these investments.

The company continues to pursue operational excellence, based on strategic
decisions of what to make and what to buy. Rolls-Royce currently manufactures
30 per cent by value of its engines and focuses on high value-added components.
The remaining 70 per cent is purchased from global suppliers. Last year the
company made significant progress with its initiative to restructure its supply
chain, with fewer suppliers providing a higher proportion of engine value.

Commenting on today's announcement, John Cheffins, Chief Operating Officer,
said: "This is an excellent opportunity to take our manufacturing operations to
a world-class level through investment in leading-edge facilities. This
investment, combined with a talented workforce and the implementation of modern
working practices, demonstrates our confidence in the UK as a centre for high
value-added manufacturing operations."

Last year, improved efficiency in manufacturing operations contributed to a 5
per cent reduction in product costs, despite a 10 per cent drop in workload. A
further 5 per cent reduction in product costs is expected this year. Sales per
employee have improved by 40 per cent over the past five years.

Investment in new facilities is already a key element of Rolls-Royce's
strategy, including a new turbine blade facility built in Derby in 1999 and a
compressor blade facility opened in Scotland last year. These together
represent an investment of £130 million. The cost of manufacturing compressor
blades in 2005 is expected to be half that of 1995.

The company hopes to obtain the necessary planning permission to commence
construction of the new facilities in the summer. The investment costs will be
contained within the company's current guidance for capital expenditure, of
approximately £200 million a year.

For further information, please contact;

Peter Barnes-Wallis or Maria Darby-Walker

Director, Financial Communications Head of Corporate Media Relations

020 7222 9020 020 7222 9020

Notes to Editors

The cases reviewed were:

  * Compression Systems, Derby - a new facility to replace the current one at
    Main Works, which was the original Rolls-Royce factory built in 1906.
   
  * Compression Systems, Barnoldswick- to replace the oldest part of the site,
    which was the original site for the development of the gas turbine.
   
  * Combustion Systems, Hucknall - a new factory
   
  * Component Services and Turbine Systems, Bristol - a new building to be
    shared by these two businesses
   
Recent investments include:

  * £85m invested in a new state- of- the- art factory for Compression Systems
    in Inchinnan, Glasgow, Scotland
   
  * £45m on a new turbine blade facility in Derby
   
Rolls-Royce operates in four global markets - civil aerospace, defence
aerospace, marine and energy. It is investing in technology and capability that
can be exploited in each of these sectors to create a competitive range of
products.

The success of these products is demonstrated by the company's rapid and
substantial gains in market share over recent years. The company now has a
total of 54,000 gas turbines in service worldwide. The investments in product,
capability and infrastructure to gain this market position create high barriers
to entry.

Rolls-Royce has a broad customer base comprising more than 500 airlines, 4,000
corporate and utility aircraft and helicopter operators, 160 armed forces and
more than 2,000 marine customers, including 50 navies. The company has energy
customers in nearly 120 countries. Rolls-Royce employs around 35,000 people, of
which 21,000 are in the UK. Forty per cent of its employees are based outside
the UK - including 5,000 in the rest of Europe and 8,000 in North America.

The large number of engines in service will generate an assured aftermarket
demand for the provision of spare parts and services. The company's strategy is
to maximise aftermarket revenues, which have increased by 60 per cent over the
past five years due to the development of a comprehensive services capability.

Annual sales total nearly £6 billion, of which 50 per cent currently comes from
aftermarket services. The order book stands at more than £18 billion, which,
together with aftermarket demand, provides visibility as to future activity
levels.