Rolls-Royce boss warns against a 'hard Brexit'

The boss of Rolls-Royce has called for "as little change as possible" after Brexit to minimise the impact on business of leaving the European Union.

Warren East told the BBC: "The further we get from the status quo, the harder it's going to be."

The engine-maker wants to continue being able to move parts and staff freely between the UK and the bloc.

Leaving the customs union and the single market could mean an end to free movement of labour and goods.

On Sunday Chancellor Philip Hammond reiterated his intention to pull out of both entities.

Speaking at the Paris air show, Mr East said that other firms also would be affected by a "hard" Brexit.

"The aerospace industry is very interconnected and there are other parts of it that operate across the boundaries between the UK and the EU. All those other companies will have the same issues that we do," he said.

Mr East's warning comes as business leaders ramp up their calls for the government to seek a soft Brexit, as well as gaining a formal role in the Brexit process. Talks on the UK's departure from the EU formally began in Brussels on Monday.

Josh Hardie, CBI deputy director-general, said it was "absolutely clear" that putting the economy first had to be the new government's priority.

Meanwhile, a joint report by the National Institute of Social and Economic Research and the Chartered Institute of Personnel and Development warned that ending the free movement of workers from the EU would damage UK business and public services "unless post-Brexit immigration policies take account of the need for both skilled and unskilled labour from the EU".

Mr East also said that leaving the EU would mean the UK no longer being part of the European Aviation Safety Agency, which regulates the industry and certifies aviation products.

Such a scenario would be a major problem for companies such as Rolls, whose engines power commercial aircraft.

However, he said it could be possible for the UK to become an associate member of the agency in the same way as Switzerland or Norway.

Rolls-Royce has had a troubled few years that culminated in January with the company paying close to £700m to settle bribery allegations with authorities in the UK and US.

That settlement, along with the fall in sterling since the Brexit vote, pushed it to a huge £4.6bn loss for 2016.

Mr East, who became chief executive of Rolls almost two years ago, said he expected a "modest improvement" in the company's financial performance this year.

He also signalled an end to big job cuts, such as the axing of 800 jobs in the marine division last December due to poor customer demand.

The number of large engines being produced had doubled, which required more staff, Mr East said: "On headcount we're flat - we have fewer managerial positions and more people who are assembling engines and building components."

Rolls has 23,000 workers in the UK and a total of 55,000 worldwide.