Belfast Telegraph

Gallaher's cigarette factory closure: An inevitable consequence of a shrinking market

By John Simpson

The announcement that JTI plans to close the tobacco manufacturing plant at Lisnafillan in Ballymena is disappointing and a further sign of the problems in maintaining factories making cigarettes in the changing retail market in the UK and also in other EU countries.

A continuing campaign, based on health concerns, to persuade people to stop smoking was inevitably going, first, to squeeze the profitability of factories competing for a contracting market for their products and, second, to see the relocation of semi-automated modern processes to locations where labour costs for less skilled workers were lower.

The announcement by JTI, formerly Gallaher's, that production will move to other factories in the JTI group in Poland and Romania fits the logic of seeking lower costs of production in a market place where total production will possibly fall.

Northern Ireland was formerly a major centre for cigarette manufacture and the manufacture of other tobacco products.

Gallaher and Murrays employed many hundreds in factories in York Street and Sandy Row.

Over the years, faced with higher taxation on tobacco products, health warnings and the costs of shipping tobacco from tobacco growing areas into Northern Ireland, the ability to make adequate profits has declined.

The move from York Street to Ballymena, linked to further investment in higher capacity working methods, was a late-in-the-day attempt to remain profitable.

The more recent takeover by JTI (in the last 10 years) may, with hindsight, be seen as an effort to defend local manufacturing capacity.

There was a long period when the Northern Ireland plants were supplied by raw tobacco from countries such as Zimbabwe, where flue-cured tobacco sourced there was well regarded in world markets.

The cost of transporting raw tobacco was acceptable so long as the final products held strong market place positions.

Today, warmer climate countries have a competitive advantage in keeping tobacco growing and processing closer to customers.

The cigarette market in the UK is decreasing as taxes and health warnings hit sales. Recent proposals on packaging and taxation have further hit prospective sales.

JTI has said that its factory closures will be completed from 2016 to 2018. This is an unusually long period of notice. Getting new jobs will not necessarily be easy but for the 950 employees in Ballymena, as marginal comfort, there is time to consider how to respond.

Belfast Telegraph

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