Rolls-Royce rating lowered by Morgan Stanley and S&P Ratings

Following the lowering of its ratings by US bank Morgan Stanley, Rolls-Royce shares have fallen 2.8%.

Analysts at Morgan Stanley cut the firm's rating to a neutral “equal-weight” assessment citing the reason being that Rolls-Royce's weaker underlying cash flow was likely to continue for the coming months - due to ongoing issues with its Trent 1,000 engine.

Earlier this month, Rolls-Royce announced a longer timeline for a final fix to the improved high-pressure turbine (HPT) blade for Trent 1000 TEN engines until 2021.

The group reported that premature blade deterioration continued to cause Boeing 787 operators “significant disruption”. It was also said that in-service costs are set to increase by a total of £100 million across the next three years.

In a separate note, S&P downgraded its long term rating of the firm to BBB, and reiterated its negative outlook - this marks the second reduction in three months.

In a statement, S&P said: “We regard Rolls-Royce’s profitability as weak and volatile, and below-average compared with peers in the aerospace and defence industry."

The downgrades have come in response to Rolls-Royce offering a warning where it stated that costs from the engine issues would come to £2.4 billion between 2017 and 2023. This is an increase from the company's previous forecast of £1.6 billion.