What would be the real impacts if SPC closed?

A major political furore is happening at the moment over the Federal Government’s refusal to bail out SPC-Ardmona to the tune of $25 million to keep it operating. The government is saying no more bailouts, but its own backbencher, the local member Sharman Stone has been trying to change their mind. What we actually need is some hard data.

The closure of SPC certainly sounds like a pretty major blow for the town. The Shepparton Preserving Company carries the name of the town and has been a mainstay of the economy for nearly 100 years. But Shepparton has a diverse economy, and perhaps it would be resilient? Fortunately, the City of Greater Shepparton, population 62,300, Gross Regional Product $2.5 billion, has access to economy.id which can provide some evidence about the workings of the local economy.

Media reports such as this one discuss the potential loss of 800 jobs if the factory closes, but these are only the direct jobs. Any industry such as this is closely integrated into the economy of the town and there will be many flow-on effects to suppliers and customers of that industry, as well as consumption effect, when the people who lose their jobs have less money to spend locally.

The impact module can help. All economy.id subscribers now have access to this.

For Greater Shepparton, I put in a loss (-) of 800 jobs in the Food Product Manufacturing sector. This sector currently employs around 2,500 people, so a loss of 800 is about one-third of the sector, a big shock to be sure.  However it is only 2.5% of the total workforce in Shepparton.

As you can see from the output here, Food Product Manufacturing has a large supply chain in Shepparton, and the effects go far beyond the immediate 800 people and the company’s profits.

A loss of 800 jobs means a decline in the sector of just over $54 million. But once you factor in the supply chains, using a multiplier of 2.52, that is a total loss of $137.5m to Shepparton’s economy. That’s around 6% of the total economy. But Shepparton doesn’t exist in isolation, and has supply chains feeding through to other parts of Australia. So the model estimates that another $71.4m would be lost to the rest of Australia.

This brings the total economic decline due to the closure of SPC Ardmona to $208.9m across Australia, with losses of almost 2,500 jobs, more than 3 times the number lost in the cannery itself.

Let’s see what sectors these jobs are coming from.

Naturally the largest loss is in Manufacturing, down by over 900 in Shepparton itself. But there are two other sectors hit hard. Retail trade stands to lose over 200 jobs just in Shepparton, and nearly 100 elsewhere. SPC Ardmona has a shopfront which employs many people, and I stock up there every time I visit! Then there are losses in all the other stores that stock SPC products.

But the biggest associated loss is in the Agriculture sector, losing 327 jobs in Greater Shepparton and another 116 outside. We have heard fruit producers saying that they will have to plow in their trees over this, and this effect is what is being measured here. Without a ready market for their produce, many farmers will not survive. And it’s not just about Shepparton – most of those other 116 jobs are in other parts of the Goulburn Valley such as Moira Shire, which supplies a lot of Shepparton’s produce as well.

So overall, yes, this would be a very big economic shock for Shepparton, and indeed the whole country to some extent. Is it worth a bail-out of $25m to save potentially 2500 jobs and $202 million in the Australian economy? That’s not up to me to decide. What do you think?

All economy.id clients now have access to the Economic Impact Module which can model these sort of negative impacts as well as positive impacts (gaining jobs and industries) in your economy. If your council doesn’t subscribe, talk to us today!