Agenda: Is the North’s manufacturing landscape shifting rather than dying?

Harland & Wolff (H&W) going into administration is being billed as a symbol of the end of the super-employer era in Northern Ireland.

It is a big-name loss, and a devastating development for the 120 or so shipyard workers who were recently working on oil rig and green energy projects. Yet it is also remarkable that the business, which once employed more than 30,000 but has not built a ship since 2003, survived this long.

Local commentators say the demise of long-established large employers such as H&W, the closure of Ballymena-based JTI Gallaher's tobacco factory and the town's Michelin tyre factory in recent years, and troubles at both Wrightbus and Bombardier should not be seen as a signal that industry is exiting the North. Rather we are simply seeing manufacturing evolve, they suggest.

Some people do end up on the scrap heap, which is not a nice description but it's true

EY Ireland chief economist Neil Gibson says industrial employment is moving away from several big employers dominating the landscape towards niche and small players, specialist skills, changes in the way production lines are working, and high value-added activities.

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“Mass employment jobs are either going somewhere where the labour is cheaper or they are being mechanised,” he says. The days of 10,000 to 15,000 employees in a factory in a developed country are all but gone because of how economies have evolved.

"What is encouraging for Northern Ireland is that in those unique skills required around, for example, computer design or precise engineering, it's not possible to mechanise."

Manufacturing employment today in the North stands at about 88,000, the highest it has been since 2003. This is about 11 per cent of employment, compared to just over 8 per cent for the UK as a whole, showing the North’s relative industrial strength.

The private sector in the North is small, so large-scale losses are felt hard. As one of the more industrialised regions in the UK it is also emotionally difficult as manufacturing losses hold a particular cultural cachet for some given the industrial history and heritage of the place.

Sophistication

Manufacturing can now be broken down into three categories: food production, transport and heavy engineering. In each of these there are thousands of untold success stories in the North, which see individuals, small and larger companies competing globally.

Some of these businesses have reduced their employment footprint by outsourcing areas like PR, HR, security, cleaning, catering and other service functions. And there are signs of increasing sophistication.

“Despite the tough news this employment is not a mirage, there is success there, it’s just shaped differently,” says Gibson.

On the recent closures, he says: “I don’t think these signify the end of Northern Ireland. No more than the demise of linen or shipbuilding in its big sense. That didn’t end manufacturing. It is just part of a global world. It’s just changing.”

But where will the changes leave those currently working in the old-school manufacturing jobs at factories that may close?

GMB trade union regional official Michael Mulholland says: "We hope they will get work, but it all depends on the business. Manufacturing has moved to mid-Ulster away from around Belfast, so it's a lot about geography and if people can or would move."

More generally, Mullholland says that when companies close different agencies speak to specialist workers and see if they can add to their skills and then find jobs elsewhere. Yet there will always be casualties.

“Some people do end up on the scrap heap, which is not a nice description but it’s true. People have given their whole lives, and work has taken its toll on them, and some find it difficult to move into a new modern way of working, and so won’t work again.”

Manufacturing NI chief executive Stephen Kelly says overall job levels across the North's economy are back to where they were pre-crash, turnover is up, export sales are up and wages are up. So the broader picture remains positive despite the trouble at large employers.

He supports the narrative of a shift in the manufacturing landscape rather than a signal of its demise.

“We no longer have the behemoths, we don’t have the huge companies. But we do have a raft of successful medium-sized ones and a huge amount of successful smaller companies.”

Family businesses

There is significant growth in particular in the engineering sector, largely based in mid-Ulster, according to Kelly. These are home-grown family businesses creating work in their local communities but also selling globally.

“It all demonstrates the shift away from trying to attract a big brand new factory into a community; actually the future is more about supporting those smaller firms to become medium sized and potentially large.”

Kelly says that to do this two big challenges need to be addressed.

“Our businesses are only able to sell to GB customers if they can continue themselves to have a seamless, cost-free, complexity-free supply chain bringing stuff in from the Republic of Ireland and elsewhere. So we need a Brexit deal or we are not able to supply into that UK market place.”

The other issue, he says, is people.

Canadian aerospace giant Bombardier announced plans to sell its aerostructures business in Belfast earlier this year

“Every company we speak to says the skills aren’t available [in certain parts of the North] so the education system and careers system does not feed the people we need into our businesses to allow them to be successful.

“The people thing will be the biggest restricter of any future growth of the manufacturing sector, and Brexit continues to be an existential threat to it.”

The director of the CBI in Northern Ireland, Angela McGowan, says there are also fears among its members about the global slowdown.

“People are mentioning to me about the Brexit uncertainty, holding off on big capital investment, which is starting to filter through now to demand for products, particularly if you are providing something now for the construction sector.

“Foreign exchange has given some of them a bit of a hammering in terms of component parts are much more expensive, and they will be passing those on to customers and consumers.

“Increased prices globally makes them less competitive, and they are having to hold inventory levels because of Brexit, some of them with three- or six-month supplies which carries a cost.”

No industrial strategy

She says the absence of a government in Stormont since January 2017 is also a "huge problem"– to the tune of £500 million a year – to the local economy.

“There is no industrial strategy, energy strategy, tourism strategy, and while permanent secretaries are working on these now for a lot of things, they need ministerial sign-off.

“A lot of infrastructure was held up because there was no executive, and even things like getting proper funding models – for example the water infrastructure around Belfast, there will be no new connections to the mains after 2021 because the system can’t cope. The only way we can put the investment in there is to get a proper funding model.

“There are actually 55 towns across Northern Ireland where development has been paused and halted because the water and sewerage haven’t got the capacity to cope with further development.”

She says the private sector is resilient but has been “pushed to the limit with Brexit”.

“Some are spending a lot of money on contingency plans, some are refusing to spend any money because they can’t afford it and are more of less saying their plan would be moving 20 or 30 miles south of the Border to cope with it.

“They will find ways around it, but it is costly and it is having an impact on the bottom line, there is no doubt about it.”

McGowan says it is impossible to plan when Brexit has not been defined. Every CBI member she speaks to says no deal is simply not an option for the Northern economy, and that “the companies will simply relocate or close”.

She says there is a broad acceptance there is a slow down. Demand is down, capital projects have stalled, investment levels have been poor since 2016, skills concerns are widespread and Brexit worries are dominating.

“With a population of 1.7 million if you want to grow your economy you do need people. But at the moment the economy looks like it is cooling a bit and adjustments will be made for that, particularly if there is a no-deal Brexit. The civil service has estimated an impact of about 40,000 jobs lost.”

Better tech

On a more upbeat note, aeronautics expect Prof Mark Price, the Queen's University Belfast pro-vice-chancellor for engineering and physical sciences, says his faculty is working with established companies to make them more efficient and help move them into advanced manufacturing. He says this requires more skill and better tech, and therefore is more difficult to replicate in countries where labour costs are lower.

Price says it is partly true that there is a shift in jobs, but suggests perception is also a factor because job losses are reported more frequently than gains.

Co Antrim bus manufacturing company Wrightbus, which employs 1,400 people, backs Brexit and is known for its London Boris buses, is currently working with financial advisers Deloitte to find investors.

"They are still a great company, exporting globally to China and Singapore, with a great future in technology and development," says Price.

Meanwhile, Canadian aerospace giant Bombardier announced plans to sell its aerostructures business in Belfast earlier this year. It employs 4,000 people in Belfast .

Elsewhere in the aerospace industry, BE Aerospace in Kilkeel, Co Down, was bought over by Rockwell Collins, while Thompson Aero Seating in Portadown, Co Armagh, was bought by Avic (Aviation Industry Corporation of China). Between them those two companies hold around half of the global market for aircraft seats.

In the wider manufacturing supply chain, JW Kane, a small machining company in Craigavon, Co Armagh, has recently been bought over by Singapore Airspace Manufacturing, another global supplier of aerospace components, adding hundreds of high-value jobs. It has plans to invest heavily and significantly grow the business.

“If you look broader at the aerospace manufacturing capability here there is a lot of real strength and growth,” says Price.

Crushing equipment

He also points to the materials handling sector, where more than 40 per cent of global screening and crushing equipment for the mining industry is made in mid-Ulster, and companies such as Terex, CDE, and Maximus Screening are all growing and creating jobs – and doing it on a global scale.

In the electronics sector Seagate in the northwest is producing around 25 per cent of read-write heads for computer discs, "a very high-value, high-end, research-driven industry".

Creative Composites in Lisburn recently created 132 jobs, and fellow Antrim company Ballymoney-based Dowds group is planning to hire close to 70.

Advances in software and fintech are also evident with growth for companies such as Citibank, Allstate, PwC, Deloitte, and First Derivatives in Newry, Co Down.

“It’s an interesting landscape,” says Price. There has been shift in the North from lower-value manufacturing engineering to higher productivity, higher value and high skills.

“It is becoming a much more advanced economy. We have a long way to go in terms of truly leading in a global landscape, but we have pockets of genuine global leadership, and we have an opportunity there.”

He looks at it from being a supplier of research ideas at one end and the skills supply at the other end.

He says there is a shifting dynamic, growth in tourism, fintech, software, AI, and the creative and film industries, which all “spread into each other”.