Rolls-Royce today confirmed it had opened talks with its workforce over a £1.1billion shortfall in its pension funds.

The news came as the engine maker announced profits for 2002 had almost halved to £255million because of falling civil aerospace orders.

Rolls-Royce, which employs more than 900 people in Barnoldswick, is the latest major employer to face a 'black hole' in its pension fund caused by falling share prices.

Nobody at the plant was available to comment today.

Pendle MP Gordon Prentice said: "I'm obviously concerned about Rolls-Royce.

"We all know that internationally aerospace is going through a difficult time.

"It is worrying that the pension fund should be £1 billion short and that is being addressed by management and unions.

"The shortfall will have to be made up by employers' and employees' contributions.

"Interested MPs have regular meetings with Rolls-Royce. There is one shortly and I shall raise these issues with management then.''

In its annual report, chief executive Sir John Rose said the shortfall in its three UK pension funds had increased to £1,117 million compared to £284million the previous year.

He said Rolls-Royce intended to continue with its 'defined benefit scheme', but had begun talks with employees over what the company described as "mitigating actions" in connection with pension benefits.

Rolls-Royce warned in August it could take an additional £35million charge to its profit and loss account and the current discussions are likely to focus on keeping the extra contribution within that range.

Sir John said he did not want to "pre-empt the outcome" of the discussions but it is thought likely options will include additional contributions from members.

Officials at the Amicus union said their members would be unhappy if they were forced to pay more into the pension scheme and received less when they retired.

General secretary Derek Simpson said: "We are reluctant for our members to pay the price of past mismanagement of the scheme. It is incumbent on the company to make a gesture and guarantee the pension scheme for their workers, after all they are a profitable company and will be in future years."

Rolls-Royce, which employs 22,500 people in the UK, said it was committed to its defined benefit pension scheme, which closed to new entrants in January 1999.

The engine maker is not alone in seeing its pension deficit spiral and estimates have put the current shortfall in FTSE 100 company schemes at £85billion.

The company added that the restructuring announced in the wake of September 11 had been successfully implemented with annual cost savings of £250million expected.

Rolls-Royce said last week it planned to remove 1,100 jobs as part of modernisation at Derby, Bristol and Hucknall, Nottingham.

John Boardman, works convenor at Barnoldswick, is also cahirman of the union's pensions negotiating committee. "There is a lot of concern among people here at Barnoldswick," he said.

"The company says it wants our members to contribute moe in eturn for reduced benefits. We are not happy with this proposal and we ae due to talk to the company again in April."