GOVERNMENT SET TO DEVASTATE RAIL SUPPLY CHAIN

On the eve of the crucial Transport Select Committee, that will be considering the procurement of trains in the UK, a new survey has just been published revealing the extent of the devastation that will be caused to supply chain companies if the Government refuses to chase its mind on the Thameslink contract.

The survey, conducted by ‘Survation’ for Unite the Union interviewed 125 companies (primarily their Managing Directors) operating in the UK that supply Siemens and/or Bombardier for train manufacture.

The companies were interviewed about the potential impact to their business of Bombardier losing the Thameslink contract to Siemens. Siemens plan to manufacture the rolling stock in its German factories where as Bombardier pan to build the trains in Derby.

The interviews were conducted between Friday August 26th and Thursday September 1st.

The sample was intended to represent a cross-section of UK businesses involved in supplying services, components and parts to the global train manufacturing industry. Seventeen observations were collected via a web-based invitation survey with the remainder (108) via telephone interviews. The questions were the same for both methods.

Almost half of the suppliers interviewed rely on Bombardier for at least 5% of their sales; while at the other extreme 6% of those interviewed rely almost entirely on Bombardier.

Only 24% of UK Suppliers we interviewed currently supply Siemens, indicating that they are poorly positioned to provide Siemens with future train manufacture. The shortfall in business from the Bombardier plant in Derby not manufacturing Thameslink trains would, in many suppliers’ views, not be supplemented by orders from Siemens.

40.59% of the companies we interviewed - plan to execute job losses. Indeed, some suppliers have already lain off workers. 32% have done so or plan to do so within the next 3 months. Of those expecting job losses 73.7% expect them within the next six months. Despite the government looking to review the UK’s procurement process in the light of recent job losses suffered at Bombardier, the announced 1-year delay to the Crossrail contract is unlikely to help the employment picture as many jobs will already be lost.

When asked “How will they be affected by Bombardier losing the Thameslink contract to Siemens?” responses ranged from “none” to “substantial”, and in some cases complete closure. We found that of the total sample, 19.2% of businesses believed it would have a substantial negative impact on growth and almost a third (32.0%) believed it would have a substantial negative impact on sales.

Businesses holding one or both of these opinions (a substantially negative impact on growth or sales) could be found nationwide, from Abadare to Witney (See A-Z impact tables in the linked document). While the greatest number of impacted companies were found in Derby – (the UK’s rail production hub) – Birmingham, Nottingham and Chesterfield were ranked highly in the survey in terms of the number of businesses facing job losses. Only one respondent believed Bombardier’s loss of contract to Siemens would have a positive impact.

Overall, Small-Medium sized Enterprises (SMEs) will likely see the largest impact on their businesses if Bombardier loses the Thameslink contract. They face higher job losses as a proportion of their business and they are likely to execute job losses in a shorter period. Almost two thirds (65.6%) of SMEs we interviewed do not currently supply Siemens, compared to the survey average of 53.6%.

Damian Lyons Lowe, from ‘Survation’ said: “Our previous survey work relating to Bombardier looked at the striking local political impact in Derby of the government decision to award preferred bidder status to Siemens over Bombardier. This survey has shown there will also be a meaningful impact on jobs and growth nationally, particularly to small and medium sized companies”.

The Government must be persuaded to stop the act of economic vandalism because of the impact on unemployment and economic growth.