Several large subcontractors supplying goods and engineering services to Hillside in South Dunedin said yesterday the proposed job cuts could affect their businesses.
Otago Chamber of Commerce chairman Peter McIntyre said several businesses within Dunedin's engineering cluster - formed last year in response to KiwiRail's decision to outsource construction contracts - said the proposed job cuts would have flow-on effects to the local economy.
Hillside and Dunedin's engineering firms had to explore innovations to create more business opportunities for themselves.
"The engineering cluster in Dunedin is significant and Hillside is a major part of our local industry," Mr McIntyre said.
Farra Engineering chief executive John Whitaker said the loss of 40 jobs at Hillside would have wider implications for Dunedin engineering firms.
Most workshops within the city's engineering cluster provided sub-contracting services to Hillside, he said.
However, it was questionable whether the South Dunedin job cuts would have an immediate flow-on effect on sub-contracted firms.
"We're reasonably busy at the moment in our fabrication shop, so it won't have immediate implications ... But we have anticipated further work [from Hillside] and if that doesn't eventuate, we will have to find it elsewhere," Mr Whitaker said.
Hillside was an important customer for Farra, providing "significant" revenue through subcontracting work spread across three engineering divisions.
Subcontracts for the design and manufacturing of heavy-duty "rigs" used to square and support large-scale engineering structures, the fabrication and welding of flat-deck components, and machining work on carriages were some of the main support services Farra provided, Mr Whitaker said.
The Hillside job losses would hurt prospects for rail engineering work in Dunedin.
"It is a real shame for the city. You don't like to think that it will be the end of flat-deck construction [at Hillside], but it will certainly be harder and harder for them to get the work."
Kensington-based engineering firm E.B. McDonald, which is located close to Hillside, is also likely to be affected by KiwiRail's decision to downsize, E.B. McDonald general manager Greg Wansink said.
Hillside contracts accounted for about 50% of the firm's business, Mr Wansink said.
E.B. McDonald is supplying components and door systems for 58 TranzScenic passenger carriages Hillside is close to completing for KiwiRail's South Island tourist routes.
"It is a large contract for us ... we had anticipated picking up more work, but it appears the writing is on the wall," Mr Wansink said.
The potential loss of contracts with Hillside might have an impact on his firm's workforce - the job cuts would probably send skilled engineering workers overseas looking for higher wages, Mr Wansink said.
"Let's be honest, people stay here for the lifestyle, not the wages.
"If the jobs aren't here for them, then they'll head away for better pay."
