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Bombardier job cuts: Competing in a global market is only way to revive patient

Published 23/02/2016

Job losses have hit the big manufacturers
Job losses have hit the big manufacturers
Danske Bank’s Angela McGowan
ICTU’s Peter Bunting

In spite of big-ticket job losses like Bombardier, manufacturing employs more people here than at any time since the crash of 2008. So, why is there a palpable feeling of decay in the sector, asks Paul Gosling.

Britain was known as the "Workshop of the World" during the Industrial Revolution. For generations since this place has been one of the UK's own workshops - manufacturing goods for export around the world.

But, in recent years, something has changed.

The potential loss of 1,080 jobs at Bombardier, plus 870 from JTI Gallaher and 860 from Michelin, both through planned closures in Ballymena, is clear evidence of this.

Yet it is wrong to simply say that Northern Ireland's manufacturing is dying.

As Employment and Learning Minister Stephen Farry and other politicians have explained, the number of jobs in manufacturing here has increased in recent years.

According to the latest labour market report from the Department of Enterprise, Trade and Investment, there was a 5% rise in employment in the sector in the year ending last September, with 80,460 people employed at that time.

Even this underestimates the actual picture. The sector's lobbying organisation, Manufacturing NI, has commissioned a review that is being completed by Oxford Economics. The Belfast Telegraph has been given exclusive access to the report in advance of its official publication.

This shows that, once the self-employed and other "micro-businesses" are included, the sector directly employs 85,200 people - the highest number since the global crash.

Moreover, 214,000 people in Northern Ireland have jobs as either a direct or an indirect result of the sector after taking into account the supply chains and what is called the "multiplier effect" (the wider knock-on impact of the industry).

"About one-in-four jobs is linked to manufacturing," explained Stephen Kelly, chief executive of Manufacturing NI.

"There are 5,000 manufacturing firms, 1% of which are large employers. But 49% of employment is from them.

"Companies like JTI, Michelin and Bombardier are critical, but we need to attract more of them, either by developing our own, or attracting foreign direct investment."

Oxford Economics predicts that growth in manufacturing in Northern Ireland will outstrip the rest of the UK in the coming period, after several years in which job numbers declined.

Talking about employment numbers, though, is only part of the story.

Average pay at JTI Gallaher is £56,000. In Romania average pay in the tobacco industry is less than £10,000 a year.

Meanwhile, Invest NI is attracting new manufacturing jobs. An example is the expansion at Moy Park, which two years ago announced the creation of 628 jobs at average pay of £17,000.

Mr Kelly rejects the obvious conclusion. "It is not the case that we are losing well-paid jobs from international companies which are being replaced by badly-paid processing jobs," he argued. "We are creating new, well-paid, engineering jobs."

He points to various recent announcements in which smaller engineering businesses are creating new, high-value employment.

But others have concerns. Davy Thompson, regional co-ordinator for the Unite union, said: "The calibre of jobs coming in is not the same as those we are losing. The wage rates are not the same."

There is also the confusing issue of what exactly we mean by manufacture.

"The largest components are the manufacture of food, beverages and tobacco products, transport equipment and rubber and plastics", explains the Oxford Economics report. Food processing is of growing importance to Northern Ireland, but pay rates do not match those in engineering.

"Manufacturing is so diverse as a sector," explained Professor Neil Gibson of Ulster University.

"The real success has been food processing. For those types of industry, where proximity (to the location of raw materials) is important, the production is unlikely to be moved overseas."

The challenge, argues Gibson, comes with production that is more exposed to global cost pressures. Wage and energy costs have been important factors in recent decisions by global companies to reduce the size of operations here, or to close them.

"That wage pressure will come to all of the sector," he said.

"Romania and Poland are growing in competitiveness all the time. The cost pressures are acute.

"The US has been successful in recent years because of low energy costs and by controlling wage costs.

"For Northern Ireland, manufacturing is a sector where wage inflation is very unlikely in the coming years."

Another interesting trend emerges from the Oxford Economics report. Of the 85,000 people directly employed in manufacturing in Northern Ireland, just 11,000 or so are located in Belfast. And a large proportion of those are with one employer - Bombardier.

Gibson says this shift away from manufacture being located in a major city is part of a global trend.

"Belfast has some advantages for industry because of its docks," he explained.

"But once cities start to grow, it is very difficult for trucks to get in and out.

"Industry has gone from most big cities."

Moreover, those factories that are left are likely to face new pressures from property costs after the devolution of corporation tax drives more office development in Belfast, predicts Gibson.

Angela McGowan, chief economist at Danske Bank, believes we should cherish the type of jobs that we are losing. "These job losses are a shame, because they are coming from the more advanced manufacturing side," she said. "Engineering skills are crucial."

She argues that to protect these there need to be close relationships between engineering companies and our universities on research and development and on skills. She also wants to see more investment in transport infrastructure.

"There is a correlation between good transport networks and economic growth and it's about digital connectivity as well," she said. "These things really do make a difference."

Unite makes a similar argument. It wants to see more investment in transport, including in our rail networks to facilitate haulage.

In addition, it argues for UK Government action to cut the costs of travel across the Irish Sea. One option it favours is a road bridge between Scotland and Northern Ireland. And, like the industry itself, Unite is demanding action to bring down energy costs, in particular by accelerating progress on a north-south electricity interconnector.

The Northern Ireland committee of the Irish Congress of Trade Unions also sees more investment in infrastructure as part of a solution.

It wants the Executive to establish a committee to consider how more high-paid, high-value jobs can be created and in support of this is calling for closer links between industry and university research and development.

Peter Bunting, its assistant general secretary, met with Invest NI last week and welcomes its efforts attract work from the aerospace industry to fill the gap left by Bombardier's announcement.

Yet, for all the action and words from Invest NI and ministers, there is an unavoidable feeling of decline in the sector that Northern Ireland used to be a specialist in. While manufacturing has a future here, many of the new jobs are likely to be poorly paid.

Our high-value manufacturing is struggling to compete in a globalised economy.

Belfast Telegraph

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