La Lettre 23/02/2026

EDF – Bernard Fontana et sa communication interne
Neuf mois après sa prise de fonction, le PDG d’EDF Bernard Fontana tente de redorer son image en interne après des décisions impopulaires (réduction d’un milliard d’euros de frais généraux, interdiction de l’alcool). La direction de la communication, menée par Benoît Gausseron, a orchestré un portrait élogieux dans Challenges et un film corporate interne. La DRH Élisabeth Terrail a organisé un séminaire avec les syndicats le 3 février pour relancer le dialogue social. Par ailleurs, Fontana et Cédric Lewandowski se sont réconciliés sur le rapport de modulation du parc nucléaire — Lewandowski ayant fait son mea culpa — et le rapport enrichi a été publié le 16 février avec la PPE3.
Parlement européen – Le PPE contre la directive eaux usées
Le PPE, via les élus Tomislav Sokol et Peter Liese, cherche à alléger la facture de la directive sur les eaux urbaines résiduaires (UWWTD) pour les industries pharmaceutique et cosmétique (1,8 milliard €/an sur 20 ans). Ils envisagent une proposition de résolution pour demander une pause à la Commission européenne, mais risquent l’opposition des socialistes et des Verts. Le PPE mise aussi sur l’omnibus environnement pour influer sur les réglementations. La CJUE a jugé irrecevable la plainte des lobbys cosmétique et pharma le 18 février.
Paris – Municipales et Rachida Dati
Deux pro-Szpiner (Véronique Bucaille et Farida Kerboua) ont rejoint la liste de Pierre-Yves Bournazel (Horizons/Renaissance). Rachida Dati, candidate à la mairie, garde le black-out sur sa liste, créant de la fébrilité chez LR. La loi PLM lui donne les mains libres sur la liste centrale, marginalisant l’influence du parti.
Défense – Satellite espion Celeste
Le projet de satellite de renseignement électromagnétique Celeste, successeur des trois satellites Ceres, reprend forme. La DGA a sollicité Airbus Group, Thales et Unseenlabs, avec un lancement prévu fin 2026. Le programme a connu de multiples reports depuis 2021.
Médias – CNews et l’agence AIMV
L’agence AIMV (ex-sous-traitante de BFM TV) va fournir des reportages à CNews pour les municipales. Les journalistes de Sud Ouest s’inquiètent d’une collaboration durable avec la chaîne de Bolloré. Le SNJ a saisi les procureurs et l’Arcom, dénonçant des pratiques de marchandage et de prêt illicite de main-d’œuvre.

>>> What to look at today - 23rd of February 2026

The dollar and futures on the S&P 500 slid on Monday as uncertainty over trade policy damped sentiment toward US assets and raised the prospect of heightened volatility across global markets. Contracts on the US benchmark were down 0.7% while Nasdaq 100 futures slipped 0.9%. The Japanese yen, Swiss franc and the euro led gains against the dollar as a broader gauge of the greenback declined after gaining last week. Bitcoin tumbled nearly 5% to fall below $65,000 while gold and silver climbed. The moves indicated investors were beginning to price in a higher risk premium for US assets. Hours after the Supreme Court struck down his sweeping reciprocal tariffs on Friday, President Donald Trump imposed a new 10% global levy and vowed to use other powers to maintain his signature tariff policies. On Saturday, he said he would raise that new tariff to 15%, stoking fresh economic turbulence. A gauge of Asian equities climbed as much as 1% on Monday amid expectations the court ruling will be particularly beneficial for two of the region’s biggest economies — China and India — which had been hit the hardest by Trump’s tariffs onslaught. Morgan Stanley economists say the weighted average tariff rate for Asia will fall to 17% from 20%. Investors remained eager to learn more about Trump’s new game plan given the consequences it will likely have not just for the US and the Federal Reserve’s monetary policy, but also for global economies and corporates. Though there are other ways in which he can introduce import taxes, the court ruling invalidates a large portion of the tariffs that he has rolled out in his second term. A gauge of Hong Kong-listed Chinese stocks was the top gainer among key Asian indexes on Monday as mainland equity markets shut for holidays. The US court ruling comes just weeks before Trump’s planned visit to China. He lands in Beijing on March 31, the first trip by an American president since his last visit in 2017. Elsewhere in markets, oil fell as investors weighed the odds of a nuclear deal between the US and Iran. Equities also jumped in Taiwan as trading resumed after a weeklong holiday. The S&P 500 added 0.7% Friday, notching its best week since Jan. 9, with optimism over the Supreme Court’s tariff ruling offsetting worries over heightened tensions between the US and Iran. An ETF tracking emerging markets hit all-time highs. The dollar slipped 0.2%, trimming its weekly advance to 0.6%.  The yield on 10-year Treasuries rose two basis points to 4.08% in a volatile session Friday following mixed growth and inflation data before the tariff ruling added uncertainties over any potential budget shortfall. Cash trading of Treasuries in Asia was closed on Monday due to a holiday in Japan. The friction over tariffs spilled out Sunday as Europe’s trade chief said he’ll propose halting ratification of a deal struck with the US, while India postponed talks to finalize an interim trade deal. Senior US officials said Trump’s tariff defeat at the Supreme Court won’t unravel deals negotiated with US partners.  Those deals — which the administration made with partners including China, the European Union, Japan and South Korea — remain in place, US Trade Representative Jamieson Greer said Sunday on CBS’s Face the Nation.

Nikkei Closed Hang Seng +2.29% CSI Closed Shanghai Closed Shenzen Closed

Eur$ 1.1821 CNH 6.8899 CNY 6.9048 JPY 154.38 GBP 1.3520 CHF 0.7724 RUB 76.7916 TRY 43.8338 WTI$ 65.62 +1.29% Gold 5,160 +1.05% BTC 64,710 -4.26% ETH 1,857 -4.74%

S&P -0,66% Nasdaq -0.83% EuroStoxx -0.29% FTSE -0.23% Dax -0.49% SMI +0.07%

Macro :
- Bitcoin Falls Below $65,000 in Latest Bout of Tariff Uncertainty
- EU May Freeze US Trade Deal Approval on Trump Tariff ‘Chaos’
- Lagarde Says US Tariff Moves Risk Upsetting Equilibrium With EU
- Mayhem Rocks Mexico After Most-Wanted Cartel Boss Is Killed

Keep an eye on :
- ABVX FP : Abivax Says New Obefazimod Data Shows Drug’s Potential for IBS
- AIR FP : Airbus Offers German Production for Satellite Contract, FAZ Says
- BABA US : +3,60%
- ALM SM : Almirall FY Net Sales Match Estimates
- AMZN US : Hackers Used AI to Breach 600 Firewalls in Weeks, Amazon Says
- BAYN GY : Bayer Draws No-Nonsense Missouri Judge to Vet Roundup Deal Plan
- BEAN SW : Belimo FY Net Sales Meet Estimates
- BA US : NASA Delays Moon Mission to Fix Rocket, Rules Out March Launch
- CCL LN : Carnival Corporation and Carnival Plc to Unify, List on NYSE
- CVC NA : Private equity owners slash valuation of Swiss watchmaker Breitling
- EMEIS FP : Emeis Exits Accelerated Safeguard Plan Early on Court Approval
- ENEL IM : Enel Approves Start of Up to €1b Buyback Program
- ENEL IM : Enel Signed Agreements to Buy 830MW Wind, Solar Plant Portfolio
- FBIN US : Investor Ed Garden Builds Stake in Fortune Brands, Seeking New CEO -- WSJ
- IDR SM : Indra is negotiating the sale of its strategic consulting subsidiary to the Waterland fund
- IDR SM : Indra Weighs Sale of Consulting Arm to Waterland: Expansion
- JMAT LN : Honeywell Is Said to Cut Price for Johnson Matthey’s Catalyst
- KKR US : KKR Is Said to Agree to Buy School Firm XCL in $1.3 Billion Deal
- LI FP : Simon Property Group CEO Steps Down From Klépierre Board
- LUG CN : Lundin Gold in $670m Silver Stream-For-Equity Deal With LunR
- BMPS IM : Paschi Approves Preliminary List of Candidates for New Board
- MONY LN : MONY Group FY Adjusted Ebitda Beats Estimates
- NFLX US : DOJ Probes Netflix’s Power Over Filmmakers in Warner Deal Review
- NIO US : Chinese car brand Nio performed 165,898 Battery swaps in a single day - Electrek - +3,60%
- NVDA US : Google Is Exploring Ways to Use Its Financial Might to Take On Nvidia -- WSJ
- NVDA US : Nvidia Wants to Be the Brain of Consumer PCs Once Again - WSJ
- PGHN SW : Private Equity Owners Slash Valuation of Breitling: FT
- PGHN SW : Partners Group to Open Office in Kuwait
- PNL NA : PostNL 4Q Normalized Ebit Beats Estimates
- 1913 HK : Prada : +3.22%
- RDDT US : Why Reddit’s Stock Plunged 42% In Past Five Weeks - The Information
- RR/ LN : Rolls-Royce Urges UK Govt. to Support £3b Engine Project - Full FT Article
- RWE GY : Vestas Gets Firm Order for RWE’s 1,380 MW Vanguard West Project
- SKAGI IR : Islandsbanki Drops Plans to Take Over Insurance Company Skagi
- SON PL : Sonae Gets €500m in ESG-Linked Refinancing, Extends Maturities
- SpaceX IPO : NASA Delays Moon Mission to Fix Rocket, Rules Out March Launch
- STMPA FP : STMicro Starts Process to Find CEO Successor, Corriere Says
- UBI FP : Ubisoft Continues to Consider Asset Sales, CEO Tells Les Echos
- VNDA US : Vanda Gets FDA Approval For Bipolar, Schizophrenia Drug
- VWS DC : Vestas Gets Firm Order for RWE’s 1,380 MW Vanguard West Project
- VCP LN : Victoria Sees Earnings Below Previous Expectations
- DG FP : VINCI Enters Exclusive Talks For French Motorway Concession
- WBD US : What's Next in Warner War? Paramount Likely Raises Offer to $32

>>> Europe : Brokers Upgrades & Downgrades - 23rd of February 2026

>>> Up
* Alphabet Raised to Overweight at Wells Fargo; PT $387
* ASR Nederland Raised to Outperform at Mediobanca SpA
* Centrica PT Raised to 224 pence from 203 pence at JPMorgan
* CBRE Raised to Buy at UBS; PT $185
* Norsk Hydro Raised to Buy at Citi; PT 105 kroner
* Santander Raised to Outperform at RBC; PT 12.25 euros
* SGS Raised to Buy at Research Partners; PT 120 Swiss francs
* Sobi PT Raised to 500 kronor from 470 kronor at Jefferies
* TechnipFMC PT Raised to $69 from $56 at TD Cowen
* Unipol PT Raised to 25.70 euros from 24.80 euros at Berenberg

>>> Down
* Airbus Cut to Neutral at Rothschild & Co Redburn; PT 200 euros
* FM Mattsson AB Cut to Neutral at SB1 Markets; PT 80 kronor
* Hochtief Cut to Neutral at Grupo Santander; PT 324 euros
* Icade Cut to Equal-Weight at Morgan Stanley; PT 25 euros
* Orange Cut to Neutral at Grupo Santander; PT 18.20 euros
* Rio Tinto Cut to Neutral at Goldman; PT 7,400 pence
* Sulzer Cut to Hold at Research Partners; PT 200 Swiss francs
* Valiant Cut to Neutral at UBS; PT 168 Swiss francs
* Verve Group Cut to Hold at Nordea
* Xbrane Biopharma Cut to Hold at Pareto Securities; PT 8 kronor

>>> Initiation


>>> Call
* Centrica PT Raised to Street High at JPMorgan on Turnaround
* Icade Cut at Morgan Stanley on More Limited Self-Help Potential
* Norsk Hydro Upgraded at Citi, Now Cheaper Than Aluminum Peers
* Quilter Placed on JPMorgan Positive Catalyst Watch Over Buybacks
* Unipol PT Raised to Street High at Berenberg on Dividends

>>> Stoxx 600 Pre-Market Indications

  • Nokia (NOA3 TH) +1.8%
  • Rolls-Royce (RRU TH) +1.7%
  • Fresnillo (FNL TH) +1.4%
  • Boliden (BWJ TH) +1.3%
  • Legal & General (LGI TH) +1.2%
  • Mandatum (N2S TH) +1.1%
  • Kerry Group (KRZ TH) +1.1%
  • Prosus (1TY TH) +1.1%
  • Antofagasta (FG1 TH) +1%
  • Aurubis (NDA TH) -1.8%
  • ASML (ASME TH) -1.8%
  • Mondi (KYC0 TH) -1.9%
  • Fraport (FRA TH) -1.9%
  • Puma (PUM TH) -2.1%
  • Pernod Ricard (PER TH) -2.3%
    • Pernod Ricard Cut to Sell at Deutsche Bank; PT 74 euros
  • Bilfinger (GBF TH) -2.7%
  • Bakkafrost (6BF TH) -2.9%
  • Hochtief (HOT TH) -3.1%
  • Johnson Matthey (JMT2 TH) -6.3%
    • Honeywell Is Said to Cut Price for Johnson Matthey’s Catalyst

>>> TradeGate Pre-Market Indications

DAX:
  • SAP (SAP TH) -1.1%
  • Adidas (ADS TH) -1.1%
  • Mercedes (MBG TH) -1.2%
  • Rheinmetall (RHM TH) -1.3%
  • Bayer (BAYN TH) -1.3%
MDAX:
  • IONOS Group SE (IOS TH) +1.3%
  • Hochtief (HOT TH) -1.9%
  • Fraport (FRA TH) -2%
  • Bilfinger (GBF TH) -2.1%
  • Puma (PUM TH) -2.1%
  • Aurubis (NDA TH) -2.2%
SDAX:
  • Deutsche Euroshop (DEQ TH) +1.2%
  • Suedzucker (SZU TH) -1.3%
  • Schaeffler (SHA0 TH) -1.4%
  • Douglas AG (DOU TH) -1.9%
  • Jenoptik (JEN TH) -2.1%
  • PVA TePla (TPE TH) -3.6%

WSJ : Anthropic’s Pentagon Problems

Anthropic’s Pentagon Problems
Plus, cleaning up cloud storage, Google’s TPU gambit, Meta goes on trial and a ‘Fitbit for farts’

Tensions between the Pentagon and Anthropic escalated in a big way this past week.

Officials at the Department of Defense were already considering canceling Anthropic’s contract due to the company’s reluctance to sign on to new terms. The Pentagon wanted the startup’s popular chatbot, Claude, to be available to the military for “all lawful uses,” we reported late last month.

Then things went nuclear, after we broke the news Anthropic had been used, via its partner Palantir, in the operation to capture Venezuelan President Nicolás Maduro.

Incensed that Anthropic had asked Palantir about how Claude was used in the raid, the Defense Department dialed up the heat. It threatened to label Anthropic—the only LLM currently cleared to work on classified material—a “supply chain risk,” the Journal reported. That designation is normally reserved for foreign actors like Huawei that would require the department to sever ties with the startup just a few months ahead of its expected IPO.

Anthropic, for its part, says its negotiations with the Pentagon continue to be productive, and the questioning about the Maduro raid was part of a routine discussion.

Even if the two sides manage to find a way to salvage their relationship, the question the spat raises about who should ultimately control AI—its creators, its users or the government—isn’t likely to be resolved anytime soon.

FT : Does Europe need more private credit?

Does Europe need more private credit?
Maybe it does, maybe it doesn’t. We’re just happy to see the data.

Private credit is a weird category. While we nod our heads and even write long posts about the asset class, what even is it?

Taking the Fed’s definition, it’s all the assets in private credit funds and Business Development Companies. If you extend the count beyond the US, Preqin puts global private credit assets under management at $2.3tn. This number, we are told, will double over the next four years:


But excluded from the count are vast quantities of investment grade direct private debt sitting with insurers. And isn’t old fashioned relationship banking just another name for private credit, albeit with a tonne of regulation, and minus yachts and sports teams for star employees? If private credit includes all lending outside of public market channels, it’s far far larger than $2.3tn (Apollo’s Marc Rowan famously puts his firm’s total addressable market at $40tn).

We’ll leave a total global holistic reckoning for another day, but Alphaville’s heart was lifted by a recent paper from Oliver Wyman. Because fine, the report makes the case for why rapid growth in private credit is needed, as Huw van Steenis outlined in MainFT. But importantly for Alphaville, it also wraps its arms around the task of sizing up at least one large portion of private finance: asset-backed lending.

Sampling the largest managers’ self-declared assets, the management consultant reckons that asset-backed financing accounts for around a quarter of the total market. We assume that more traditional direct lending makes up almost all of the rest.

If we multiply this approximate ‘quarter’ estimate by Preqin’s $2.3tn private credit number we get $575bn of asset-backed lending. Sure, this number is pretty rough. But we can use the data provided to guess how much of the total asset-backed lending market it constitutes.


Across Europe and America, the report estimates the stock of asset-backed finance is around $10.3tn. So private credit is maybe 5 or 6 per cent right now. This gives plenty of market share for private credit funds to grab — not only from banks, but also non-banks like insurers and captive financing providers (think financing arms of big manufacturers).

Moreover, they kindly sent us their break down of asset-backed lending in Europe so we could poke around the granular detail. Anyone who has had a go at this knows how hard it is to get this data, so chapeau:


Hover your cursor over the chart to see what each sub-segment is, how it splits between bank lending, non-bank lending (private credit, insurance, captive finance companies etc), and public instruments (eg, asset-backed securities, covered bonds, etc).

The small but emerging “digital and data centre” bar has a greater than typical share of non-bank financing. And the report argues that Europe needs more private credit precisely to finance this kind of project if Europe’s AI ambitions are to be fulfilled — as well as to roll out the energy infrastructure required to deliver the green transition.

As such, it appears to channel private market asset manager Apollo’s Rowan, when he argued in an earnings call last year that:

The banking system everywhere in the world funds itself short and is really good and really strong at a group of activities, generally not long dated. The public bond markets around the world generally are also good in another group of activities, generally simple and standard.

Anything that is long dated and complex, particularly highly rated, currently in Europe has no home, read the Draghi report. And in the US, the home is with people like us.

Alphaville isn’t yet convinced that the real constraint facing European AI infrastructure build-out is financing, rather than, say, planning, power, regulation, or general wherewithal. And if banks are hitting issuer concentration limits or don’t have the appetite for the duration there’s always the bond market.

In fact, US AI-build out in the US has prompted monster bond issuance, which has so far been absorbed surprisingly well. And if it works for Americans, we’re not sure why this sort of issuance wouldn’t work for Europeans (if the projects were there).

But if there really is a long-duration complex asset-backed financing gap that bond markets just can’t fill, we agree that private credit funds seem a natural source of continental capital. As long as fund investors don’t persist in asking for their money back.

FT : Private equity logjam hits record as firms struggle to sell

Private equity logjam hits record as firms struggle to sell
Value of companies sitting in buyout funds reached $3.8tn last year, according to Bain & Company

Private equity groups built up a record backlog of almost $4tn in unsold investments last year, even as dealmaking started to revive after a years-long downturn.

The value of companies sitting in buyout funds increased by 3 per cent to $3.8tn in 2025, according to a report from consultancy Bain & Company, despite more than $700bn of exits during the year.

Private equity firms have struggled to buy and sell companies since interest rates soared in 2022, with higher financing costs and an uncertain economic outlook weighing on valuations.

Hugh MacArthur, chair of the global private equity practice at Bain, said there was “little case in the near term that interest rates are going to dramatically go down”, meaning companies’ valuations were unlikely to rise to a higher multiple of earnings in the way they had previously. 

Bain said that private equity funds were holding investments for about seven years before managing to exit, up from five to six years in the period between 2010 and 2021. Investments tend to grow less in value the older they are, Bain added, particularly once they have been owned by private equity for eight years or more.

Separate data from Preqin showed a rise in so-called zombie funds which continue to hold ageing investments while being unable to deploy new capital.

The unrealised value of private equity vehicles more than 10 years old rose sixfold in the past decade to more than $1tn as of June, while the total value of the industry’s assets grew just over threefold.

Firms did manage to exit a number of big investments, with the total value of exits increasing by almost half to $717bn. That was the highest total in data going back to 2006, with the exception of the dealmaking frenzy unleashed in 2021 during the Covid-19 pandemic.

Seven large exits accounted for a fifth of that total however, with the number of deals struck down 2 per cent.

Big acquisitions also accounted for most of the increase in the value of private equity acquisitions, with 13 megadeals helping lift the total by just under half to $904bn despite a fall in the number of purchases.

The data suggests that private equity firms’ fortunes are diverging, with some big buyout groups becoming more active while many smaller competitors languish.

Difficulty cashing in investments has meant firms have struggled to return cash to investors. Those investors have in turn been less able to reinvest in new funds, with a decline in the total number of funds that closed last year of 23 per cent.

Bain said the industry was at an “inflection point” and that most buyout firms would “have to raise their value-creation game substantially” to win more choosy fund investors.

FT : Fuel shortage threatens US nuclear resurgence, warns top supplier

Fuel shortage threatens US nuclear resurgence, warns top supplier
Centrus Energy says rising demand and ban on Russian imports risks uranium enrichment ‘supply gap’

One of the largest suppliers of enriched uranium fuel to US nuclear power plants has warned of a looming supply crunch because of fast-rising demand and a ban on Russian imports.

Centrus Energy chief executive Amir Vexler told the FT the company is racing to build enrichment capacity at its Ohio plant to meet a $2.3bn backlog in sales of enriched uranium to customers. But the restart of several US nuclear plants and upgrading of the reactor fleet to boost electricity output would put pressure on the handful of western suppliers of enriched uranium — a critical component in nuclear fuel, he said.

“It is my strong belief that there is a gap between supply and demand for the existing market — just the operating reactors that we have now,” said Vexler, adding that plans to build new fleets of large and small reactors in the US would pose longer-term challenges.

“I feel the market is strained and will continue to be strained until large amounts of new capacity are going to come online and that will be in the next decade,” he said.

Enriched uranium is produced by refining mined uranium, converting it into a gas and processing it to increase the concentration of a specific isotope used for nuclear fuel.

Experts warn shortages of enrichment services threaten to derail President Donald Trump’s strategy to “unleash America’s next nuclear renaissance”. Prices have soared 167 per cent since Russia’s invasion of Ukraine in February 2022 to a record $173 per separative work unit or SWU — a measurement of enrichment services — according to UxC, a nuclear industry data provider.

The global enrichment industry has four major producers today: Russia’s Rosatom, China National Nuclear Corporation, France’s Orano and Urenco, a private company jointly owned by the British and Dutch governments, as well as German utilities RWE and Eon.

Centrus and Urenco are the only companies licensed to enrich uranium in the US.

For the moment, Centrus sources most of the enriched uranium it sells to US utilities from Russia — a trade that will be prohibited from January 1 2028 because of sanctions legislated by Congress in 2024. The company is building new uranium enrichment capacity that is due to come online in 2029.

“Enrichment is a key bottleneck for the nuclear renaissance,” said Nick Lawson, executive chair of Ocean Wall, an investment group.

“While both Urenco and Orano are investing in additional enrichment cascades, these projects take years to deliver and do not immediately replace the large share of global capacity historically supplied by Russia, which western utilities are now moving away from.”

The US is heavily reliant on foreign suppliers for enrichment services with only 4.3mn SWU of domestic enrichment capacity, while its requirements stand at 15.6mn SWU, according to World Nuclear Association data. There are currently no US-based commercial suppliers of the highly enriched fuel required to power the new generation of smaller nuclear reactors which are under development.


Russia provided about a fifth of the enriched uranium the US nuclear reactor fleet used in 2024, despite the ban legislated in August of that year. The Department of Energy is allowed to issue import waivers until January 1 2028, but only if no alternative sources are available.

Last month, the Trump administration awarded Centrus, Orano and new entrant General Matter each $900mn in funding to strengthen domestic enrichment services. It is also offering energy companies access to weapons-grade plutonium to convert into fuel in an attempt to break Russia’s stranglehold over nuclear fuel supply chains.

Urenco, which is expanding a plant in New Mexico that supplies about a third of the US market, said concerns about a looming supply gap were misplaced.

“We do not see a supply gap later this decade,” Jeremy Derryberry, director of communications at Urenco USA. “Plentiful supply from US and other western sources is available to meet demand.”

Centrus’s Vexler said western nations are relying on Urenco and Orano being able to deliver on expansion plans, which had “not really materialised yet”. Both companies shared the same technology provider that designs and engineers the complex gas centrifuges used to enrich uranium.

“The entire western world relies on a single technology,” Vexler said.

“Obviously, I wish success, and I hope it will materialise as planned. But if anything happens to that, that puts us in a bigger hole.”

FT : Rolls-Royce urges UK government to commit to subsidies for £3bn engine proj

Rolls-Royce urges UK government to commit to subsidies for £3bn engine project
FTSE 100 group looking to secure commitment in first half of the year as it steps up plans to re-enter narrow-body market

Rolls-Royce is urging the UK government to commit to taxpayer support for the £3bn development of a new aircraft engine, a crucial project for its plans to re-enter the lucrative short-haul market.

The FTSE 100 group has told senior officials it would like to secure a commitment in the first half of this year, according to three people familiar with the talks.

It is asking for between £100mn and £200mn in the first instance to help fund the development and testing of a demonstrator of the UltraFan 30 engine, the people said.

Tufan Erginbilgiç, Rolls-Royce’s chief executive, has been closely involved and discussed the matter with business secretary Peter Kyle in recent weeks, they added.

The company has been in talks with officials since last year about subsidies to help develop a fully certified engine ready to go into production, a project that is expected to cost about £3bn.

Rolls-Royce’s potential re-entry into the narrow-body market comes after three years of restructuring under Erginbilgiç.

The scale of the transformation under the former BP executive will be underscored this week when the group is expected to report record profits and free cash flow for 2025, according to its latest guidance.

Investors are also expecting the company to announce a further share buyback. Rolls-Royce announced a £1bn buyback last February.

UK officials are looking at different sources of support for the narrow-body project, including the Aerospace Technology Institute, which allocates state funding for innovation in the industry. Tapping the National Wealth Fund or offering launch support were other options, according to the people familiar with the talks. 

Using ATI funding, however, is regarded as “tricky” given the need to balance support for Rolls-Royce with the demands of other aerospace companies including Airbus and Safran who both have a sizeable presence in the UK, they said. 

The government could also take a stake in the project. “It is not impossible,” said one of the people. 

“This government is being much more interventionist and therefore it’s starting to think we’ll behave like an investor,” said a second person, adding that Rolls-Royce was on a “massive sales campaign attacking the government to get money out of them, and it’s going quite well”.

Labour has prioritised advanced manufacturing as one of eight high-growth sectors in its industrial strategy.

Rolls-Royce says the project could create about 40,000 skilled jobs, both at the company and in the wider supply chain, and generate as much as £120bn for the UK economy over the lifetime of the programme. 

The company currently builds engines only for wide-body aircraft that fly long-haul routes. It left the market for narrow-body aircraft — such as the Airbus A320 and Boeing’s 737 Max, which fly predominantly on short-haul routes — more than a decade ago.

Narrow-body aircraft make up a far bigger share of the global civil aircraft market by volume.

The group has spent more than £500mn on a demonstrator of the UltraFan engine, which aims to be 25 per cent more efficient than the group’s first Trent engines.

It said in 2024 that it had started work on a “scaled-down” demonstrator, the UltraFan 30, that would be designed to power a next-generation narrow-body aircraft.

Airbus and Boeing are expected to decide on engines for their next-generation aircraft by the end of the decade. 

Erginbilgiç has also indicated that Rolls-Royce would need to partner with another company to get back into the narrow-body market. The group previously had a partnership with US aerospace group Pratt & Whitney but pulled out of the venture in 2013.

Rolls-Royce has said that aerospace is a globally competitive industry and that its rivals receive significant backing from their home governments. Germany, where the company has substantial operations, is also interested in helping to fund the project, according to industry executives.

Rolls-Royce said it was in “constructive discussions with the government about how we can work in partnership to realise [this] opportunity”, adding that the project could “unlock a $1.6 trillion market for the UK”.

The UK’s Department for Business and Trade said: “The UK has one of the most competitive aerospace sectors in the world and we value the role that Rolls-Royce continues to play in it, supporting thousands of high-quality, high wage jobs.”