The Mk II was the only version of the Lancaster not to be powered by Rolls Royce Merlin engines. Instead, it used Bristol Hercules radial air cooled engines. The aim was to provide an alternative source of Lancasters in case the supply of Merlin engines failed. British production was seen as vulnerable to German bombing, while there were worries that American production (by Packard) would be diverted or stopped if American entered the war.
Work on the prototype Mk II began soon after the Mk I was complete, and the first prototype flew on 26 November 1941. The new model was produced by Armstrong Whitworth, with work beginning in March 1942. Ironically, while Rolls Royce was free from serious attack, the Armstrong Whitworth factory was itself bombed in June 1942, delaying the appearance of the Mk II.
By the time the Mk II entered service in October 1942, the threat to the Merlin was already receding. Initial service tests with No. 61 Squadron early in 1943 reveals one serious limitation – it had an unexpectedly low service ceiling. On its first test, against Essen on 11/12 January, two Mk IIs joined a force of Mk Is. While the Mk I operated at 22,000 feet, the best the Mk II could achieve was an altitude of 18,400 feet, while the second aircraft only reached 14,000 feet!
After tests were complete, the Mk II was issued to No. 115 Squadron, in No. 5 Group. Despite the altitude problems, the Lancaster Mk II was a welcome improvement on their Wellingtons. In service the Mk II was slightly more robust than the Mk I, lacking the extensive liquid cooling systems needed by the Merlins, although at the lower altitude this would be put to the test. An additional aid to survival was the installation of a FN64 ventral turret below the aircraft, although this was sometimes removed to save weight.
A second problem with the Mk II was that it could only carry 14,000 lbs of bombs, compared to the 18,000 of the Mk I. Ironically, the Lancaster Mk II had a performance similar to the Merlin XX powered Halifax Mk II. By the end of 1943 the Lancaster Mk II was being phased out. Armstrong Whitworth had converted to production of the Mk I, Merlin engine production was keeping up with demand, and American production had increased after the U.S. entered the war. An example of how unpredictable aircraft design could be at this period was the case of the Halifax Mk III. This saw the Halifax switch from the Rolls Royce Merlin to the Hercules engine. The performance of the Halifax was improved by the swap to the Hercules in much the same way as the Lancaster had suffered from the same move!
By D-Day only two squadrons (Nos. 514 and 408) were still using the Lancaster II. All other squadrons had moved to either Lancaster I/ IIIs or Halifax IIIs. A small number of Mk IIs remained in use as test beds, with the last surviving to 1950.