Britain's leading engineering company Rolls-Royce has flayed the reported move of the Cameron government to chop R&D grants for businesses under the expenditure review program. The company is into the production of aircraft engines and submarine engineering.

It has been reported that the Department for Business, Innovation and Skills, which oversees grant support, has been asked to cut the grants and save 20 percent from its 18 billion pounds (AU$37.38 billion) budget.

Chief executive of Rolls-Royce, Warren East, told the BBC that he was in touch with Chancellor of the exchequer George Osborne and urged him to relook the proposal in the Autumn Statement and Spending Review.

The engineering company employs more than 21,000 people in the UK, in which 9,000 are engineers. East said companies like Rolls-Royce that offer high-value, highly technical jobs are vital for the nation’s economy. The government also wants to promote such jobs because they are hard to replicate and involved in things the world wants to buy.

Rolls-Royce's UK division generates an annual sale of 5.7 billion pounds (AU$11.83 billion), in which 75 percent comes from exports. That is about two percent of the total goods exported from Britain.

R&D concern

The CEO’s concern is that if the government cuts grants for business and scientific research and development, it will adversely impact Britain's engineering future.

“It does have a negative impact on the engineering ecosystem,” East said and added it will have headwinds on jobs at some stage, particularly when there is a “positive impact from research and development grants from other parts of the world.”

Innovate UK distributes 500 million pounds (AU$1.013 billion) of grants every year. Many believe this grant will be chopped. An alternate proposal is to turn some of the grants into loans and move the costs off the government's side and have it placed on the recipient companies as debt finance. That will make a revenue stream for the government.

But East claimed that much of the money it gets as grants goes for university research funding. Therefore, the plan to convert them into repayable loans is not a wise idea. Rolls-Royce said the government's direct grant investment has been supporting recepient businesses.

“For every £1 that flows rom the government into industry, we add £17 of investment in research and development, capital expenditure and training,” East said.

Housing sector bonanza

According to the BBC, the Spending Review of Osborne is about a five-year projection of government's income and exenditure and maps out how 4 trillion pounds (AU$8.3 trillion) of taxpayers' money will have to be spent.

The Autumn Statement and Spending Review has spending limits for the next five years with details of the government's taxation and deficit cutting initiatives.

The UK will cut annual welfare spending by 12 billion pounds and all government departments will have to find a total of 20 billion pounds in savings to create a budget surplus by 2020. At the same time, Osborne will go liberal in the housing funding front with plans to address the “crisis of home ownership in our country” by unveiling the “the biggest affordable house building program since the 1970s."

It will include 2.3 billion pounds (AU$4.9 billion) of direct funding to developers for creating "starter homes" meant for first-time buyers. The government will support newbie buyers with a 20 percent discount on prices up to 450,000 pounds in London and elsewhere in the UK.

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