"Why the shockwaves of Bombardier job losses will be felt far beyond east Belfast"

Description

"Centre page" article in Belfast Telegraph 22 November 2018 re. the previous day's announcement that Bombardier planned to reduce their Belfast employment from 4,000 by 490.

Subject

Copy of article from Belfast Telegraph 22 Nov. 2018 Bombardier job loss

Dr Esmond Birnie, Senior Economist Ulster University Business School

One way to consider the impact of Wednesday’s announcement is to start with a focus on the individual and then move out to the wider Northern Ireland economy and then the world aerospace sector.

Starting with the individuals, this is obviously a heavy blow for the 490 individuals who may be losing their jobs in early 2019. It is not much immediate consolation to those individuals but some parts of Northern Ireland manufacturing have continued to grow in recent years. My colleagues in the UU Economic Policy Centre forecast that total employment in the sector could grow by about 4,000 over the next decade in a central scenario. Given that there are some gaps in the supply of skills this implies that some of the former Bombardier workers may be able to find replacement jobs but  there could of course  be considerable upset in the process and the necessity to either move to or commute to other parts of Northern Ireland.

What about the wider economic impact? In geographical terms this blow is going to be felt far beyond East Belfast. Like most other large employers, Bombardier has a quite an extensive “travel to work area”. If this job reduction heralds a reduction in the level of activity and revenue generation in the Belfast operation it is important to remember that the firm’s supply chain spreads across Northern Ireland. It also includes businesses in GB and the Republic of Ireland.

It is often said that Northern Ireland needs more technology based industries which in turn will pay relatively high wages. Bombardier certainly seems to tick the boxes in terms of the types of priorities identified in the 2016 draft Programme for Government and the 2017 draft Industrial Strategy. The wings which are manufactured in Northern Ireland for the CSeries airliners (now the A220) represent cutting edge technology.

Unfortunately, the Bombardier experience demonstrates that jobs can be precarious in technology-intensive, export-led sectors. It is always important to remember there is much more to the Northern Ireland aerospace sector than the single firm Bombardier. There are about sixty aerospace related firms. Nevertheless, we can see that some of the ambitious plans that appeared earlier in the decade for expanding the sector have not been achievable.

Wednesday’s announcement confirms that international aerospace sector is highly globalized and characterised by fierce competition. It is  becoming even more so. Those who this week have been arguing for the softest possible Brexit may view aerospace as the classic example of the sort of long and complex supply chains which must not been endangered by customs or regulatory barriers or frictions. At the same time, proponents of global Britain might argue that aircraft manufacture is a truly global sector in which the UK is as integrated with North America as continental Europe. Recent research shows that Northern Ireland’s knowledge-intensive sectors such as aerospace are much less reliant on the EU as an export market than the more traditional sectors of the economy are. Decisions about Bombardier in Belfast are being taken in Montreal and could involve relocation of production to Mexico and Morocco.

Major developments in this sector have often transcended the boundaries of any one region or country. Short Brothers, after all, began plane making 110 years ago when they won a contract to build Wright brother aircraft under licence. Shorts began to move from Kent to Belfast in the late 1930s. By the 1980s global passenger jet manufacture was dominated by the rivals Boeing and Airbus- this was what economists call a duopoly. What is striking today is how many countries are trying to break into the market for modern airliners: Brazil, India, Russia, China and Japan.  

Alongside this global competition has come an immense level of government intervention as many governments have determined this is a “must have” sector. That unfortunately poses an immense dilemma for policy makers in both London or Belfast. If they want to have a domestic aerospace sector the price will have to be paid in the form of considerable subsidies. The Industrial Strategy published 12 months ago by the London government certainly identified aerospace as a jewel in the crown sector for the UK economy and so implied continued strong government intervention and subsidy might be justified. Stormont’s own draft industrial strategy from January 2017 similarly suggested sectoral priorities but of course we do not have a regional government at the moment.

The Bombardier experience certainly illustrates how difficult it has become for aerospace companies to fund the huge up-front cost of all the research and launch activity which is associated with bringing a new airliner to the market. Notwithstanding the cash aid it has received from Stormont, the London government and Quebec Provincial government, Bombardier has made substantial adjustments as it attempts to re-build its balance sheets. A majority stake in the former CSeries has been sold to Airbus. The Q  Series and de Havilland brands have also been sold. It is too early to pronounce the end of aircraft building in Belfast but the only certainty in this sector will be continued uncertainty.