Rolls-Royce wins $11 billion UK nuclear submarine contract

LONDON (Reuters) -Britain said on Friday it had awarded Rolls-Royce a 9 billion pound ($11 billion) eight-year contract to design, make and support the nuclear reactors that power its fleet of submarines, amid U.S. calls for higher defence spending.

The deal will strengthen the Royal Navy's continuous at-sea deterrent - under which at least one nuclear-armed ballistic missile submarine patrols the seas at all times - while also boosting the AUKUS defence pact with the United States and Australia, Britain's Ministry of Defence (MOD) said.

The announcement comes after U.S. President Donald Trump repeated demands on Thursday for NATO members like Britain to spend 5% of gross domestic product (GDP) on defence.

Amid rising tensions with Russia, highlighted by what Britain said was a Russian spy ship in UK waters earlier this week, the UK government has said it will increase defence spending to 2.5% of GDP but has not provided a timeline.

The defence industry is awaiting more details on the route to the 2.5% spending level from the government's Strategic Defence Review, which defence minister John Healey said on Friday was still due to be published in the spring, following speculation it could be delayed.

Healey said the contract with Rolls-Royce, which also makes engines for aircraft, would save Britain 400 million pounds over eight years by combining multiple contracts into one.

"It's a boost to British jobs, British business. It's a boost to our nuclear deterrent," he told Sky News.

The new contract, called Unity, will also support work on the Dreadnought class of nuclear submarines which are currently being built by BAE Systems.

Unity is also expected to create 1,000 jobs and safeguard 4,000 others, the government said.

"It really shows the way that defence is part of the engine for economic growth in this country," Healey said on a visit to Rolls-Royce's nuclear reactor production facility in Derby, central England.

($1 = 0.8119 pounds)

(Reporting by Sachin Ravikumar and Sarah Young. Editing by Mark Potter and Paul Sandle)