Belfast Telegraph

Economic Growth

Manufacturing, once the bedrock of the Northern Ireland economy, has been surpassed by newer industries in recent years. However, Jenny Burnside finds the sector is making something of a revival

Welcome green shoots of recovery are beginning to emerge in the global manufacturing sector. Earlier this year, the UK and Ireland’s largest manufacturer of PVC doors and windows, the Camden Group, announced it would be creating 225 jobs in Northern Ireland over the next three years, generating £4m annually in salaries.

And according to the latest DETI NI Index of Production, manufacturing output for Q3 2010 rose by 1.3% compared to the previous quarter and a comparable UK figure of 1.1%. Further reassurance is offered from figures released over the past four quarters, which show the index of manufacturing productivity has risen by 1.2% compared to the same period one year earlier.

Northern Bank’s chief economist, Angela McGowan, noted that in the first three months of 2011, there was a strong pick up in manufacturing activity in Asia, the US and Europe, mainly driven by Germany.

“In the UK manufacturing continues to outperform the service sector and indeed the same is true for Northern Ireland. However, an under-representation of manufacturing in the national and regional economies mean the beneficial effects of rising global trade and global demand are less pronounced locally.”

Local companies working hard to counter this under-representation include Lisburn-based AB Pneumatics, who have more than 25 years’ experience as Ireland’s leading manufacturer of small air springs. AB found 2009 tough, reducing staff numbers from 12 to two to stay afloat while demand dropped consistently across the industries they served. Yet, a slight upturn began in the final quarter of 2009, continued through 2010 and still appears to be growing.

Director Peter Blair said: “In financial terms we have seen a 500% increase in turnover on the first quarter in 2009 to first quarter 2010, and a 40% increase in turnover from 2010 to 2011 for the same period. This has enabled us to get staffing levels back up to 10 employees but major efficiencies have been made throughout the business.”

He added that AB Pneumatics have also felt growing pressure due to the rising costs of raw materials. “Although there have been major savings made on raw materials by changing suppliers ... we are still seeing a general increase in the cost of our raw materials. One of our major materials is rubber, and this has had a general trend of increased pricing over the last few years.”

Rising raw material prices represent one of the key issues facing Northern Ireland manufacturers. With unrest in the Middle East, crude oil prices jumped 3.2%, imported food materials rose 2.1% and imported metal prices climbed 1.9% in February on January 2011.

Brian Gray, chief executive of the industry lobby group Manufacturing NI, said the main challenges to the industry were three-fold.

“For the rest of this year the challenges will be access to finance while the banks continue to restrict lending, energy price increases as gas goes up and oil is unstable, and the impact of the public-sector capital cuts for manufacturers’ contracts and funding for capital-grants schemes.”

The Northern Bank forecast for local manufacturing growth in 2011 currently sits at a relatively healthy 3.8% with agri-food, plastics, electronics- and health-related manufacturing all doing well.

Ms McGowan reiterated the fundamental role the sector plays in Northern |Ireland. “Manufacturing is clearly a key part of our economy going forward and while employment opportunities in the year ahead may be limited, this sector has good potential for significantly increasing its value-added income by engaging in R&D and innovation.”

Indeed, AB Pneumatic’s Mr Blair says R&D and innovation has been a key focus for them. “We have had to look at new markets and industries to sustain growth and with the help of Invest NI on an R&D project we have found a new product which will help to ensure the projected growth.”

Research published last month by the Council for Industry and Higher Education calls on the UK government to make more of manufacturers

research and development work. Specifically, the council say this could be done by developing “advanced manufacturing enterprise clusters” to re-energise the industry with closer links to the science and technology departments of top universities.

In Northern Ireland, both Queen’s University Belfast and the University of Ulster have strong links with local manufacturing firms and many postgraduate courses are shaped to meet their employment requirements. Queen’s University and the University of Ulster will co-own Bombardier’s new R&D centre, which will draw together a range of expertise across industries on advanced materials and engineering research — the Northern Ireland Advanced Composites and Engineering Centre (NIACE), to be located on Airport Road, Belfast.

Queen’s Vice-Chancellor, Professor Peter Gregson, said, “We are aware of the need to develop new and innovative technological solutions to ensure the competitiveness of our companies, both prime contractors and supply chain organisations. As part of the network of UK advanced manufacturing centres, NIACE will provide world-class support for Northern Ireland in this important area of advance engineering.”

In spite of the downturn in the economy, the manufacturing sector has been undergoing a deeper structural change over the past decade, shifting away from textile and weaving apparel to growth in both food and drink, and pharmaceutical-related manufacturing.

In 2005 manufacturing jobs in Northern Ireland fell markedly to 84% of the 2000 level.

However, by 2010, helped partly by heavy investment from large organisations such as Bombardier, BAE Systems and Caterpillar, manufacturing jobs had climbed back to 74% of the 2000 level.

Comparably, over the period 2000–2010 manufacturing jobs in Great Britain have been in sharp decline and in 2010 GB’s job level stood at 62% of the 2000 level.

Ulster Bank’s chief economist Richard Ramsey commented on the sector’s rejuvenation: “Manufacturing is weathering the storm best and employment levels in the sector are comparatively stable.”

Yet Manufacture NI’s Mr Gray observed that the sector is not out of the woods just yet, particularly as prices rise and spending cuts loom. He cautioned: “I think it’s going to be a long, hard slog to get through the rest of 2011 and the first half of 2012. Companies will continue to struggle for survival until next summer and business will be fairly flat.”

Belfast Telegraph