Anthony Hilton: Rolls-Royce could have what Hammond needs

Governments in Britain since Mrs Thatcher’s time have refused to have an industrial strategy and, as a result, we have very little industry left. McKinsey in a study a few years ago said that although roughly one pound in eight of our national income still came from manufacturing, only about a quarter of this was genuinely competitive in international markets — the science-based engineering from aerospace, defence and the North Sea, the innovation from pharmaceuticals and computing (plus a few other products with Scotch Whisky being the most obvious and lucrative) — which were unique to this country but with international appeal.

Prime Minister Theresa May seemed to have grasped the point early on that even if these sectors shoot the lights out they will still not bring in enough cash to support Britain in the free-trade free-for-all which will follow our exit from the European Union.

So she talked about, and had her civil servants develop, an industrial strategy with 10 key aims covering everything from investing in science research and innovation, to cultivating world- leading sectors and driving growth across the whole country. It was a roadmap to transform the way we run the economy, a blueprint which foresaw a fully supportive Government as a genuine long-term partner of business.

Those fine words are about to be put to the test. Britain is facing acute electricity shortages in a little over a decade when, with the exception of Sizewell in Suffolk, its existing fleet of nuclear power stations will have to be closed. Replacements need to be built, given the Government’s commitment that nuclear will remain a key part of Britain’s energy mix, but the programme to make that happen is coming apart at the seams.

Hinkley Point, being built by the French, is proving eye-wateringly expensive and technically challenging. That is raising question marks over whether it will be completed on time and on and even more questions about whether the constructing consortium will ever be in a state to develop the planned follow-up reactors at Sizewell and Bradwell.

A second nuclear grouping led by Hitachi has a new build planned for the Wylfa site in Angelsey but the industry rumour mill says it is still £2 billion short of funds it needs, though it is expected eventually to find the money.

The prospects for the third consortium led by Toshi ba do not even bear thinking about, given the Japanese company has been brought to the brink of bankruptcy as a consequence of an ill-judged foray into the US nuclear industry where it incurred crippling liabilities. Thus we need at least eight new reactors by the 2030s but are struggling to build even the first two.

However, there is a potential solution, if the Government is willing to turn its fine words about industrial strategy into action. Rolls-Royce has been making reactors for Britain’s nuclear submarine fleet for more than 50 years and has a plan to adapt this expertise for the generation of electricity. Instead of creating vast complex one-off leviathans such as Hinkley Point, it would like to supply a dozen or so of what are termed small modular reactors which fit on the back of a lorry, would be dotted round the country with each powering a city the size of Leeds and occupy a patch of land equivalent to a big football stadium. More to the point they could be coming on stream within eight years and instead of costing £20 billion a throw the first could be built for £2 billion.

Thereafter, because they are factory produced and transportable the cost would drop to perhaps £1.6 billion —and there would be much less need for long distance pylons destroying swathes of countryside.

But there is a snag. For this to happen two things are required from Government, neither of which it is good at: first it has to make its mind up to support the technology and — assuming it works — commit to a programme to use it and not change its mind at the first opportunity. Second it has to come up with some research money because Rolls-Royce as a private sector company with shareholders to support cannot afford to take the risk on its own.