Keir Starmer has delivered fantastic news for Rolls-Royce shareholders!

Rolls-Royce (LSE: RR) shares surged 221% in 2023, then 90% final 12 months. To date in 2025, they’re up one other 7.9%, bringing the four-year return to 560%!

Nonetheless, there may very well be one other catalyst on the horizon for this FTSE 100 high-flyer — a minimum of if Prime Minister Keir Starmer’s current announcement is something to go by.

What was stated?

I’m speaking about small modular reactors (SMRs), after all. These are the factory-built nuclear reactors designed to be smaller, extra versatile, and cost-effective than conventional nuclear crops.

On 6 February, the federal government set out bold plans to roll out nuclear energy throughout England and Wales. Some noteworthy plans included:

• Scrapping the set listing of eight websites, which means that nuclear reactors may very well be constructed wherever for the primary time.
• Together with SMRs in planning guidelines for the primary time, permitting companies like Rolls-Royce to construct and deploy them the place wanted.
• Reforming planning guidelines to make it simpler to arrange SMRs. 

The UK constructed the world’s first full-scale nuclear energy station, however hasn’t had a brand new one since 1995. “The trade pioneered in Britain has been suffocated by rules,” the federal government has admitted.

In future although, SMRs will likely be constructed to help power-hungry websites like AI information centres. And Starmer overtly invited tech giants like Google, Meta, and Amazon to put money into the UK. 

Nonetheless ready

Clearly, all that is nice news for Rolls-Royce’s SMR division. It says one among its mini reactors gives sufficient low-carbon electrical energy to energy 1m houses for greater than 60 years.

Nonetheless, in contradiction to the PM’s go-for-it tone, the lengthy wait goes on for the 2 winners of the UK’s SMR competitors. That is anticipated to be introduced by Nice British Nuclear on or across the time of the Spring Price range Assertion, scheduled for 26 March.

Rolls-Royce is within the operating with three abroad companies. On condition that it has already been chosen by the Czech Republic and Poland to deploy fleets of SMRs, I’d be stunned if Rolls misses out. 

Then once more, governments do generally make choices that seem to contradict their very own nationwide pursuits, so it will possibly’t be dominated out.

Enormous potential

Based on market researcher IDTechEx, the worldwide SMR market might attain $72.4bn by 2033, and a whopping $295bn by 2043. Due to this fact, if Rolls can be chosen to deploy mini reactors throughout the UK, I’d count on the share worth to jolt larger.

Nonetheless, it’s necessary to keep in mind that SMRs received’t be operational till a minimum of 2032, in line with authorities estimates. And nuclear vitality has its downsides, together with coping with the radioactive waste.

Within the meantime, Rolls-Royce will likely be judged on how its core engine enterprise performs. The inventory is at present buying and selling at almost 29 instances this 12 months’s forecast earnings. That valuation doesn’t depart a lot room for error, which means the agency must preserve hitting or surpassing its bold development targets.

If earnings are available in lighter than anticipated, the inventory might dump sharply.

Purchase extra shares?

I first invested in Rolls shares in 2023 once they had been at 149p, then added at 477p final 12 months. With the inventory now at 613p, I’m pleased with that.

Have been Rolls-Royce to endure a setback although, I’d think about shopping for extra shares. I’m bullish on the long-term development of the worldwide plane market and the potential of SMRs.