Financial impact of proposed Smithfield closure ‘daunting’

Friday, 4 October 2024

600 jobs to go as Timaru meat processing plant looks set to close

Up to $50 million a year in wages alone would be lost to Timaru’s economy if a proposal to close Timaru’s Alliance Smithfield plant goes ahead.

And that figure, calculated by economic agency Venture Timaru chief executive Nigel Davenport and Infometrics principal economist Nick Brunsdon, is only the tip of the iceberg with many other sectors expected to feel the impact if Smithfield closes.

The proposed closure was announced on Friday at an all-staff meeting. If it goes ahead, it will affect more than 600 workers at the 139-year-old plant, owned by Alliance since 1989.

A consultation period will run until October 11, with a final decision to be made by October 18.

It comes at a time when the district’s economy is already under pressure with economic activity in Timaru declining 1.3% in the year to June 2024, much sharper than the national fall of 0.2%, according to an Infometrics report released in August.

The economic consultancy said provisional GDP estimates showed the fall had been driven by a drop in transport, construction and manufacturing activity with a pull back in manufacturing, agriculture, forestry and fishing jobs.

Alliance Smithfield staff leave a meeting at the Caroline Bay Hall last Friday morning where they were told of a proposal to close the plant.

The report also showed unemployment in the Timaru District had risen by 3.7% in the 12 months to June, which was higher than it had been for some time.

Davenport said he had been working with Brunsdon to assess the likely economic impact in the event a full closure of Smithfield was confirmed.

He said about 180 of the 607 employees had finished at Smithfield in April, and 80 were still working with the Ministry of Social Development to find employment, while receiving a benefit.

Of the remaining 427 staff, 90-100 were still working on the company’s venison line, which would run until no later than the end of December, or as part of the plant’s administration team, and the remainder finished for the season last week.

Davenport said that meant they could “potentially see 507 people in the job market, which amounts to 1.9% of all jobs in Timaru District’’ .

To work out the wage bill for Smithfield, Davenport said meat processing in Washdyke, predominantly Smithfield, accounted for 10.3% of the district’s total manufacturing.

Stats NZ estimated a total of $400m in wages and salaries for Timaru manufacturing in the year to June 2024.

“This suggests Smithfield’s annual wage bill is in the vicinity of $40-50m, when considering seasonal variances,’’ he said.

But in addition to the direct wages bill were the variety of local products and services purchased by Smithfield in its day-to-day operations, many of which would largely be discontinued in the event of a full closure, he said.

This included major supplying industries, which were likely to be local, including an estimated $6m annual spend by Smithfield for transport support services and warehousing, $1m for metal fabrication, $2m for construction, $3m for cleaners and pest control, $1m for security, $1m for electricity transmission and distribution, and up to $2m for council water supply and trade waste services.

Friday’s meeting at the Caroline Bay Hall in Timaru held behind closed doors and covered windows.

“Whilst the cascade effect of these figures is daunting, should the closure go ahead, it is important we collectively look forward,’’ Davenport said.

He said the district was home to a diverse and well-performing food processing sector and he was convinced it would value the specific skills of Smithfield workers.

“As I’m sure will other sectors”.

Davenport said some companies had already expressed an interest in employing those who may lose their jobs.

More than 600 people are employed at the Alliance Smithfield Timaru plant.

Other service and community organisations were also keen to help, he said.

“I believe this gives cause for optimism.’’

Timaru District mayor Nigel Bowen said it was a strong, connected and caring community which would “pull out all the stops to ensure the Smithfield workers, who got such devastating news last Friday, are fully supported”.

While it is important not to pre-determine the consultation period, people must be realistic and prepare for the worst, he said.

A multi-agency meeting was to be held in Timaru on Thursday with Rangitata MP James Meager and representatives from the Ministry of Social Development, Multicultural Aoraki, the South Canterbury Chamber of Commerce, Venture Timaru and the council expected to be in attendance.