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Search forDoubtful future as credit crunch hits even hi-tech players
Friday, November 21, 2008, 08:10
In the summer, it was widely accepted that those involved in construction and retail would be hit the hardest.
But the deepening economic crisis over recent months has seen the impact of the credit crunch become far more indiscriminate. It appears that the squeeze on credit is starting to take its toll on nearly every sector.
Proof that no-one is safe from the credit crunch came yesterday, when Rolls-Royce announced it was looking to shed 2,000 jobs out of its global workforce of 39,000 next year.
It confirmed that 140 of these job cuts are planned for its civil aerospace division in Derby.
But unions fear that the number could eventually be far greater. It believes that the final figure could be nearer to 600. At present, Rolls-Royce employs 12,000 at the Sinfin plant.
For some time, experts have been saying that Derby's hi-tech businesses would see it through the economic downturn – the likes of Rolls-Royce, Toyota, Bombardier and Egg.
But as the squeeze on credit has worsened – with the possible exception of train-maker Bombardier, which is busy with orders – some cracks have started to appear in Derby's armour.
And no-one really seems to know whether they will develop into large fractures in 2009.
Not even Rolls-Royce is certain what the future holds.
Yesterday, when the job cuts were announced, its chief executive, Sir John Rose, said he did not know what the full impact would be.
He said: "It is too early to determine the precise effects of the global economic downturn. However, we wanted to give all our employees an early indication of the likely scale of the job reductions we expect in 2009."
Rolls-Royce said it was making the cuts because of the global economic slowdown and delays to projects by Airbus and Boeing.
In Derby, the company builds the Trent 900 engine, which powers the Airbus A380, and the Trent 1000, which powers the Boeing 787 Dreamliner.
It was announced at the beginning of the month that Boeing would delay the first flight of its 787 Dreamliner aircraft until 2009, having previously aimed to get it off the ground before the end of this year.
Last week, the head of the European aerospace group EADS said there was a possibility deliveries of some Airbus A380 super-jumbo aircraft may be delayed by one year until 2010.
But some analysts believe that the root of the problem being faced by Rolls-Royce is much the same as those being experienced by the majority of UK companies – that their customers cannot get the money they need to buy their products.
Loans from banks to place orders appear to have dried up, despite the best efforts by governments to encourage banks to start lending again.
In the aerospace industry, airlines are already struggling with rising fuel costs and falling passenger numbers.
Many of them will have placed orders for engines – but not necessarily paid for them up front. Now, because of the credit squeeze, they are struggling to find the money.
Rolls-Royce announced earlier this year that it had a record order book worth £42.1bn.
But this means little if the airlines cannot raise the money to pay for their orders.
This is a theory shared by the Engineering Employers Federation, an organisation which provides support and employment advice to the engineering and manufacturing sectors.
According to the EEF's Mark Swift, the economic landscape has rapidly changed over a matter of months.
He said: "It was not so long ago we were saying that if you were involved in construction or retail, you were in trouble.
"But it would be fair to say that the problems have now spread to every sector.
"The root of the problem is credit. It is the oxygen of the economy and when that oxygen supply is cut off, no-one can escape being affected.
"From the outside, Derby is seen as having a lot of good hi-tech industries.
"But with how things are now, not even the likes of Rolls-Royce are immune."
John Forkin, director of Marketing Derby, a public/private sector organisation set up to promote the city as a place to live, work and invest, maintains that Derby's strength is in its hi-tech industries.
He said: "Any job losses are regrettable but we should not be over-dramatic about it and should stay calm.
"Derby is not immune to the downturn but it is more resilient than other areas."
Much now rests on what Alistair Darling will say in his Pre-Budget Report on Monday.
Union Unite, which represents about 4,800 workers at Rolls-Royce in Derby, has called on the Chancellor to issue a package of measures to help manufacturers.
Unite national officer Bernie Hamilton said: "We have a world-class aerospace industry; we must retain these highly-skilled jobs at all costs."
Phil Hope, Minister for the East Midlands, has pledged to do everything he can to ensure Derby holds on to its skilled workers.
He said: "Over the coming weeks my Regional Economic Cabinet and I will be examining what action we can take to assist those whose jobs may be affected."
One worker, who joined Rolls-Royce only a few months ago, said: "It's been a normal day really and I've not noticed any panic from the workers.
"I don't think it will affect all departments but, having only joined recently, there is a concern it could affect me.
Another man, who works as a designer, said: "We're not at a stage where we need to panic.
"The company has cut jobs before but I'm sure we'll manage as we always have.
"These things are handled in such a way that, in the end, it usually works out all right."
HERITAGE: The statue of Henry Royce at the Victory Road factory, which could see the loss of many jobs during the coming year
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