£2bn writedown predicted for Rolls-Royce

Rolls-Royce will see £2bn wiped off the value of its assets this week, say City analysts, because of the fall in sterling since the EU referendum result on 23 June.

Analysts say the Derby-based firm’s writedown is not due to a cost increase, but an accountancy adjustment from the falling pound.

They also say the news could put the FTSE 100 firm into the red when it announces its first half results on Thursday.

The Derby-based aero engine company trades in dollars and takes out financially complex hedging contracts to protect against currency gyrations.

Rolls-Royce posted a £1bn charge on those foreign exchange contracts when the pound fell 8 cents against the dollar. Sterling has now fallen 16 cents compared with last year, leading analysts to expect a £2bn charge.

The company, which employs 23,000 workers in the UK, said last month that it expected to break even for the first six months of the year, and that the referendum results would have “no immediate impact on our day-to-day business.”