"Government may be wary of bailout to coachworks"

Press/Media: Expert Comment

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Article in business news section of Belfast Telegraph

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The article as submitted to Belfast Telegraph

 

The Wrightbus cash crisis

 

Dr Esmond Birnie, Senior Economist, Ulster University Business School

 

In its most recent self-assessment (the Company accounts for 2017 lodged in September 2018), Wrightbus said they had delivered a “solid performance” and that they were “industry leaders” in clean technology for buses. Now, however, a substantial loss has been indicated for this year. A cash injection of perhaps £30m may be needed, perhaps even a new owner.

 

All this matters a great deal for the Northern Ireland economy. Wrightbus is a flagship business with 1,400 staff: one of region’s largest private sector and manufacturing businesses. It ticks all the right boxes in terms of doing R&D and exporting. It plays a pivotal role in the economy of Mid and East Antrim especially since the closure of Michelin in Broughshane and JTI in Galgorm.

 

There were a few warning signs. Turnover fell during 2016-17 from £214.6m to £181m. There were two job reductions in 2018, each involving 95 positions.

 

What went wrong? Wrightbus has had some big global orders over the years in the Americas and Asia-Pacific but it remains dependent on the UK for about 80% of its sales. Unfortunately, the UK bus market is currently in a bit of a lull following a previous boom in orders as operators adapted to new emission standards. So far, orders for low/zero carbon buses running on electricity or hydrogen have been small.

 

What should be done? There have already been demands for the UK government to provide the necessary cash injection assuming no private investor comes forward. Ironically, this crisis coincides with the start of Boris Johnson’s Premiership. As London Mayor Johnson had been a major customer of the firm. The case for intervention is based on the assumption that the current difficulties are temporary and that Wrightbus will have a good order book over the longer term.

 

Historically, private sector companies which have required a rescue by the state sometimes rise like the phoenix- Rolls-Royce aero engines, some of the American car makers, if Short Brothers had not been nationalized it would not have survived to be bought by Bombardier. At the same time, the operating subsidies provided to many Northern Ireland businesses in the 1970s and 1980s often led to less efficiency and damaging dependency. In this case, as with Harland & Wolff, government will be very wary of anything which could become a permanent involvement.

 

 

Period25 Jul 2019

Media contributions

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Media contributions

  • Title"Government may be wary of bailout to coachworks"
    Degree of recognitionRegional
    Media name/outletBelfast Telegraph
    Media typePrint
    CountryUnited Kingdom
    Date25/07/19
    DescriptionCommissioned article
    PersonsEsmond Birnie