Rolls-Royce has secured up to £599m from Britain’s national wealth fund as it races to develop the UK’s first small modular nuclear reactors.

The fund will help support Rolls-Royce’s design of small modular reactors (SMRs) at Wylfa on the island of Anglesey (called Ynys Môn in Welsh).

SMR technology aims to produce nuclear power stations in factories to drive down costs and speed up installation.

Wylfa generated nuclear power from 1971 until 2015, when it shut down its last reactor. Hitachi, the Japanese conglomerate, tried to build a new nuclear power station there but ultimately abandoned its plans in 2020 after failing to agree government funding. The state-owned Great British Energy – Nuclear (GBE-N) bought the site from Hitachi in 2024.

The chancellor, Rachel Reeves, said the investment would help “strengthen our energy security, create skilled jobs and help to build a new generation of homegrown nuclear technology that will power our economy for decades to come”.

The national wealth fund said its funding is expected to help create about 1,000 jobs at the company.

Labour has embraced nuclear energy in the hope it can generate electricity without carbon dioxide emissions, while also offering the chance for a large new export industry in SMRs.

The government announced on Monday that Rolls-Royce SMR and GBE-N signed a contract that allows work to start immediately on SMRs.

It will be welcome news for Rolls-Royce, the FTSE 100 maker of jet engines that the government chose as its preferred developer last year.

The company owns the majority of Rolls-Royce SMR, alongside Qatar’s sovereign wealth fund, France’s BNF Resources and the Czech utility CEZ.

Rolls-Royce SMR has more than 1,000 employees working to produce technology that will also be installed at Temelín in the Czech Republic.

Tufan Erginbilgiç, chief executive of Rolls-Royce, said it was a “critical milestone” for the business and for the UK as it works towards a “golden age of new nuclear”.

It “provides crucial contractual certainty in our domestic market that will unlock the opportunity to deploy a global fleet of Rolls-Royce SMRs,” he said.

Tom Greatrex, chief executive of the Nuclear Industry Association, added that the deal was a “historic step for clean power, industrial growth and skilled jobs in Wales”.

“It marks the beginning of a significant and exciting new phase for the project and the people of Ynys Môn,” he said. “It allows work to begin on a project that will create thousands of jobs and attract significant investment locally and across Britain, while helping to secure the UK’s long-term supply of reliable, low-carbon power.”

The national wealth fund, which is based in Leeds, Yorkshire, launched officially in 2024 to drive investment into the UK’s clean energy and growth industries. The fund is owned by the Treasury, but operates independently from the government.

The fund said it would provide up to £599m to Rolls-Royce SMR in the form of a loan. It will be repaid either when Rolls-Royce starts to deploy its SMR units, or through refinancing.