The news that the contract to supply 65 new trains for the London Crossrail Project has been awarded to Bombardier, has brought great joy to many in the city of Derby and no doubt a collective sigh of relief. Despite winning an £188 million contract to build 130 carriages for Southern in 2011, the company announced at the beginning of the following year that their orders would allow it to continue operating in Derby only as far as 2014. Unless significant new orders were received, it looked likely that the Litchurch Lane Works would very soon have to close, possibly with the loss of over 1,600 jobs.
The Crossrail Project contract was absolutely vital then, not just for the workers involved, but for the future of train manufacturing in Britain. If the contract had been handed to another company, it was likely that Bombardier would have had little choice but to close the Derby plant. As it is, the Department of Transport say that the contract will support 760 manufacturing jobs along with 80 apprenticeships which, according to Bombardier, will necessitate the creation of up to 340 new jobs (http://www.bbc.co.uk/news/business-26063121).
Rail Manufacturing in Britain: 2003-2012
But aside from the obvious benefits to those whose jobs are now secure, along with the 340 new employees, what does this mean for Derby and even for the country as a whole? Before answering this, it is useful to take a high-level look at the levels of employment in the industry over the past decade. In 2003, there were 6,740 people employed in the Manufacture of railway locomotives and rolling stock (SIC 3020) throughout Britain. By 2012 — the latest year for which we have figures — the numbers had fallen to 3,884, a fall of 42%, as shown by the following graph:
Concentration of Jobs in Rail Manufacturing
Of the 3,884 jobs remaining in the industry in 2012, the highest concentration was in Derby, where a total of 1,658 were employed in the sector. We can quantify this regional concentration by using what is known as the Location Quotient (LQ) — a measure of job concentration in a particular sector in a given area, as measured against the national average. Britain as a whole is assigned an LQ of 1.0, and other regions are then measured against this. An LQ of less than 1.0 in a particular area signifies that the industry has a lower concentration in that region compared to Britain as a whole, whilst an LQ of more than 1.0 shows that the industry is highly concentrated in that area.
When we look at the Manufacture of railway locomotives and rolling stock, we find that Derby has an LQ of 96.10. This is an extremely high LQ, and is indicative that Derby is overwhelmingly the centre of rail manufacturing in the country. Whilst there may be employment elsewhere, the jobs are not very evenly distributed in those other areas.
This is perhaps no news to us, but one thing that might come as a surprise, given that the Derby Litchurch Lane Works is the last remaining train builder in the country, is that there are actually people employed in this industry outside Derby. In fact, the data tells us that a total of 2,226 people were employed in the sector outside Derby in 2012 (this is of course before Hitachi announced the creation of hundreds of new jobs in Newton Aycliffe, County Durham at the end of last year). But if Derby was home to the last remaining train manufacturer in the country in 2012, what were all these people doing? The table below shows the top 15 occupations within the industry, comparing 2003 with 2012:
|Occupation||Employed in Industry (2003)||Employed in Industry (2012)|
|Production, works and maintenance managers||835||486|
|Rail construction and maintenance operatives||793||396|
|General office assistants/clerks||365||217|
|Routine inspectors and testers||360||212|
|Design and development engineers||377||210|
|Assemblers (electrical products)||433||160|
|Other goods handling and storage occupations n.e.c.||247||148|
|Metal working production and maintenance fitters||257||140|
|Filing and other records assistants/clerks||234||130|
|Quality assurance technicians||187||119|
|Marketing and sales managers||168||102|
In other words, the Manufacture of railway locomotives and rolling stock industry includes a wide variety of occupations, but it should be noted that it also includes other rolling stock producers, for example manufacturers of rail-road excavators, which are based outside Derby.
The Ripple Effect
The fact that Derby has a high concentration of people employed in this sector clearly suggests that train manufacturing is crucial to the city’s economy. But does the news that 340 new jobs are to be created there have any wider repercussions? According to our Input-Output model, it does.
Input-Output modelling is a technique that links the interdependencies between different sections of an economy, measuring the ripple effect of certain economic actions on the wider economy (for more specific details of how this is done, email firstname.lastname@example.org). So if 340 jobs are added in Derby, the effect is not just on those 340 workers, nor is it just confined to the city of Derby, but rather the new money which has entered the economy as a result of these new jobs will have a knock-on effect on other industries and in other regions.
So what happens if we run an Input-Output impact scenario for Derby alone, where we assume the introduction of 340 new jobs in the Manufacture of railway locomotives and rolling stock? According to our scenario, the addition of these 340 new jobs will have the following effect on Derby:
- 373 new jobs added to the Derby economy throughout all industries (i.e. 33 jobs in addition to the 340)
- Total additional earnings across all 373 new jobs would be £11,334,640
What happens if we then run the same scenario, but look at the effect on the whole of the East Midlands? This time the ripple effect or “multiplier” is greater, since the addition of jobs and new earnings in Derby will connect to a broader supply-chain network throughout the wider region. Therefore, the effects of the additional 340 jobs on the East Midlands as a whole are as follows:
- 435 new jobs added to the East Midlands economy throughout all industries (i.e. 95 jobs in addition to the 340)
- Total additional earnings across all 435 new jobs would be £12,644,196
The Effects Across Britain
So if we were to run the same scenario for the whole of Britain, what would we find? As the geographical area is greater, so too is the multiplier (e.g. the ability to keep spending and supply-chain interactions within the broader economy) and so the introduction of the 340 new jobs in Derby is set to have a significant effect, as the following figures suggest:
- 1,058 new jobs added to the Great Britain economy throughout all industries (i.e. 718 jobs in addition to the 340)
- Total additional earnings across all 1,058 new jobs would be £29,211,675
In addition to these impressive headline figures, we can also use the Input-Output model to predict which industries these extra jobs will be created in:
As you can see from the table, the addition of 340 jobs in the Manufacture of railway locomotives and rolling stock in Derby could particularly benefit the retail sector, with 199 extra jobs being added across the country. It would also benefit other manufacturing industries, with another 116 jobs added in other manufacturing sectors throughout Britain (i.e. 456 minus 340). This stems primarily from increases in consumer spending as a result of the new jobs and earnings created in the economy.
What if Bombardier Hadn’t Won the Contract and Had Closed?
There is one final scenario which is worth looking at. Imagine that the contract for the Crossrail Project had been awarded to one of Bombardier’s rivals. What then? Assuming that no other contracts were received, it may well have been the case that the plant in Derby would have closed at some point within the next 12 months, with the loss of around 1,600 jobs. Using the Input-Output model, we can see what the effects on the entire British economy might have been:
As you can see, the ripple effects would have been huge, with a loss to the British economy of nearly 5,000 jobs across a number of industries, representing a total loss of earnings of almost £138 million. What all this shows is that the awarding of the contract to Bombardier to make 65 trains in its Derby works is not merely good news for Derby, nor is it just confined to the building of trains. The ripple effect of this new impetus is a great blessing for the whole country.
For more information about EMSI data, or any of our tools, please contact Andy Durman (email@example.com).