ROLLS-ROYCE has dashed hopes for a return to growth after seeing customers delay or cancel orders due to worsening economic conditions.

The engine firm warned the tough climate would increase its focus on costs, including headcount.

Bosses previously ruled out growth this year due to defence spending cuts, but now expects profits in 2015 will also be up to three per cent lower.

It said: "In the last few months economic conditions have deteriorated and Russian trade sanctions have tightened, leading a number of customers to delay or cancel orders particularly in our nuclear and energy and power systems businesses."

The company remains hopeful civil aerospace markets will strengthen over the medium-term, due to increasing demand for travel in emerging economies and the need to replace older aircraft with new fuel efficient models.

John Rishton, chief executive, added: "While the short-term is clearly challenging, reflecting the economic environment, the prospects for the group remain strong, driven by the growing global requirement for cleaner, better power.

"The operational efficiencies already achieved and the cost programmes we will now accelerate will put us in a better position to benefit from these growth drivers."

Rolls-Royce has customers in more than 120 countries, including more than 380 airlines and leasing firms, 160 armed forces and 4,000 marine customers, including 70 navies, and 1,600 energy and nuclear clients.