Belfast Telegraph

Dangers faced by firms could have a serious impact on the NI economy

John Simpson writes about a critical period for key Northern Ireland companies Bombardier, Harland & Wolff and Wrightbus

Wrightbus, with co-founder William Wright
Wrightbus, with co-founder William Wright
Harland & Wolff

Serious crises have now emerged in three prominent Northern Ireland manufacturing businesses. Harland & Wolff is for sale and a new owner has not yet been found.

The owners of Short Brothers, Bombardier, are offering to sell the local plant and operations in order to focus on manufacturing in Canada and the USA.

Production rates at Wrightbus in Ballymena have slowed and the firm is seeking further financial support to maintain a viable organisation.

Each of these businesses is facing decisions which could bring major changes and lead to reduced employment.

The coincidence of all three at one time adds to the uncertainty and poses not only managerial problems in each firm but, for Northern Ireland as a whole, poses questions on possible responses at Government level, whether at Stormont or Westminster.

Northern Ireland is currently enjoying historically high levels of employment and unemployment is lower than in any period, possibly, of the last 50 years.

The apparently never ending problem of getting more people into jobs has translated slowly but surely into more frequent questions of finding people with the right skills to fill a wide range of vacancies.

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That does little to ease the immediate threats in this group of three key businesses.

The recent histories of each of the three businesses contrast sharply.

Each has reached the same point: the business is not earning any profit for the owners or investors.

Bombardier - Short Brothers

The decision by parent company Bombardier to put some of its assets in Northern Ireland and Morocco into the market place was unexpected.

However, the scale of the financial problems facing the Northern Ireland registered company have been well publicised.

In the last four to five years, Short Brothers accounts have reported annual turnover, recently of nearly £700m.

As the Belfast companies increased their workload in developing the wings for the C Series, there was always an anticipation of a trading loss until production reached commercial levels.

The scale of the losses seems to have proved larger and more enduring than planned and more recently Bombardier has contracted to allow the A220 (which is the renamed C Series) to be developed by Airbus.

Short Brothers last registered a pre-tax profit in the year to December 2014.

Pre-tax losses since then, stated in dollars but converted to an approximate sterling equivalent, have continued at a high level, even if smaller in 2018 than previously.

However, a pre-tax loss of over £33m in 2018, on top of larger losses in the three earlier years, points to questions which may have cumulatively influenced the decision to sell the local assets.

In recent years, local employment in Bombardier has been reduced and is now under 4,000 people.

Harland & Wolff

In recent years Harland & Wolff has enjoyed the use of the facilities of the building dock and engineering equipment, some of which is from the days of shipbuilding. Recently, the business has enjoyed success in gaining contracts for a small number of ship repair and maintenance jobs and, additionally, it has expanded its work on equipment for off-shore renewable energy exploration and platforms.

Accounts for 2017 and 2018 are not yet registered: indeed, the accounts for 2017 seem to be overdue.

The last registered accounts for 2015 and 2016 show a serious deterioration in the levels of turnover and profit.

On a turnover in 2015 of nearly £67m a small pre-tax profit of £2.2m was made. Then in 2016, turnover fell to only £8m and the pre-tax loss was £7m.

The company has had a larger workload in 2017 and 2018 but there have been no statements of the trading outcome. The number of employees seems to have stayed below 200.

The future of H&W is complicated by a number of additional factors. The land and equipment, including the building dock, are thought to be of interest to the Harbour Commissioners.

A sale of H&W would also need to take account of the responsibilities for nearly 2,600 H&W pensioners (former employees) whose pension fund is administered by H&W, with obligations (as in December 2016) of £175m and an actuarial deficit of nearly £32m.

Wrights Group

The emergence of financial needs at Wright Group is something of a surprise.

This group has been trading profitably and, until recently, was paying annual dividends to the parent company in 2016 of £4m, although this fell to £0.4m in 2017.

Wrights Group has not yet filed its accounts for 2018. However, in the preceding years, annual turnover was falling from £276m in 2015 to only £227m in 2017.

Pre-tax profits fell sharply in 2017 to £1.5m from £10.7m a year earlier.

The group in recent years has enjoyed successful results but the evidence in 2017 was that turnover and profits had fallen sharply. Some of the profits earned in earlier years were routed to the parent company, Cornerstone Group, which has a significant charitable range of activities. The Wrights Group is, therefore, less protected by accumulated financial reserves.

When published, in the next few months, the accounts for the year 2018 are expected to confirm the tightening financial position.

Decisions awaited

Each of these important businesses is facing critical decisions, ranging from gaining extra external support or allowing redundancies and painful adjustments.

As the Government and enterprise agencies review the situation, there will be assessments of the viability and acceptability of any rescue or recovery steps.

Proposals for support will be tested for potential longer-term viability and, if Government agencies become involved, will be tested against the continuing rules on the acceptable form of any State Aid.

For each business and for their employees, this is a critical period.

Belfast Telegraph