Ministers have agreed to hand Rolls-Royce up to £1.25bn of taxpayer support under a deal to ensure the engineering giant's next jet engine is built in Britain.
The FTSE 100 company confirmed plans for £2.5bn to be invested over the next 10 years as it develops a new turbofan engine for the lucrative short-haul aircraft market.
It is expected to create 3,300 domestic jobs by 2029 and will be seen as a victory for the UK following a charm offensive by German and US politicians. They have been seeking to secure work for their own industries with generous offers of support.
The research and development programme announced by the Government and Rolls on Wednesday fears that the national champion will move work abroad to bed.
But it is expected that each party will agree to "match fund" the other, implying taxpayers are on the hook for half of the total investment. The final figure has not been confirmed yet.
Tufan Erginbilgic, the chief executive of Rolls-Royce, has previously defended the requests for state support, arguing it was "not uncommon".
Labour's commitment to 'reindustrialisation'
He has also argued that basing the work here would be "enormous" for Britain, generating 40,000 jobs across the supply chain and £120bn in economic value.
After the announcement on Wednesday, which Andy Burnham highlighted as proof of Labour's commitment to "reindustrialisation" , shares in Rolls-Royce jumped 1.7pc.
The Prime Minister said: "Britain has always been an industrial powerhouse. But that strength isn't just part of our past; it should be a core part of our future too.
"That's why we're driving forward reindustrialisation and this agreement shows what that looks like in practice.
"It gives businesses the certainty to invest, creates jobs people can build a future on and keeps British industry where it belongs, at the forefront of innovation."
Rolls-Royce will use the support to continue technology research for UltraFan
, the highly efficient geared turbofan engine that it is proposing for use in the next generation of aircraft being developed by rivals Airbus and Boeing.
Crucially, the company says its engine could be used by both long-haul, wide-bodied aircraft and the narrow-bodied planes favoured by short-haul carriers such as Ryanair.
Rolls-Royce is expected to invest many billions more than the £2.5bn committed on Wednesday once a design has been finalised and the engine moves to full development.
Mr Erginbilgic said: "Aerospace is a growing and globally attractive market and this programme with government is vital to enable the UK to compete.
"Working together, we can also sustain the nation's capability to power military aircraft and secure its position as one of only two countries that can design, develop, make and service the jet engines that power the world's commercial airliners."
Rolls-Royce stopped producing narrow-body engines more than a decade ago, meaning the company missed a subsequent boom in demand for best-selling aircraft such as the Boeing 737 and Airbus A320.
The Ultrafan offers a route back in, with the company working on a demonstrator.
