Memorandum from the Confederation of Ship
Building and Engineering Unions (CSEU)
The Confederation of Ship Building and Engineering
Unions (CSEU) represents employees in the ship building, aerospace,
vehicle manufacturing and general engineering sectors that supply
products and services to the MoD.
The CSEU welcomes the publication of the Defence
Industrial Strategy and the opportunity to comment upon it. We
welcome the general approach of the MoD to improve the procurement
process and improve the working of both the MoD's own departments
and that of the private sector industry.
We agree with the government that global security
has changed substantially over the past fifteen years both in
the needs of the sector and the technology that has become available
to the sector.
The CSEU accepts that this has required a change
of approach to national security by the Government which in turn
has required a review of the Defence Industrial Strategy. The
document clearly changes the emphasis to one where through life
capability management will become the norm rather than initial
equipment acquisition and upgrades.
Strategic importance, high value design and
systems engineering capabilities, sovereignty and operational
independence will become the watch words for the retention of
our industrial base rather than jobs or production capacity.
However, we have a number of concerns with this
strategy and the effects it will have on UK industries, jobs,
skills and the economies of some of the more remote parts of the
UK where there is little alternative employment.
We believe that although the strategy to some
extent recognises this, the Strategy needs to have more consideration
for link between UK defence strategy and that of the overall UK
economy especially in the areas of employment, intellectual property,
skills, training and regional development.
A number of points in the strategy stand out
as needing a further review:
a) The UK defence market is the most open
in the world; it is far more open than both the US and that of
our European Union Partners. This may be beneficial in that allowing
competition from companies outside the UK helps drive down price
and improves the quality of defence products. However, this policy
can have a downside in that it often results in job losses and
a loss of intellectual property from the UK, while at the same
time potentially reducing security of supply as we have to rely
on elements outside the control of the UK.
It is quite clear that all US defence orders
have to contain at least a 60% US component which effectively
precludes manufacture outside the US while our European partners
regard all military and military support expenditure as of national
importance and only submit it to internal tendering process.
We also note that the MoD hopes to encourage
our European partners to be more open in their procurement policies
and hopes to help create a European Defence equipment market.
It is our experience not only in the areas of
defence, but in other areas including energy that this will be
a long time coming. In the meantime this policy puts UK companies
and their workforce at a disadvantage. We would strongly caution
a speedy advance down this road before our competitors are prepared
to embark down the same road, at the same speed.
b) The strategy identifies that outside
the US there is little ability for other western countries to
maintain a cradle to grave industrial base. The CSEU does not
disagree with the statement. However, we have a number of concerns
over areas of work that strategy believes can or should be outsourced
or undertaken offshore. Especially work on new platforms.
c) The strategy recognises the importance
of High Skills which are needed today to deal with advanced technology
that are now part of the defence sector. We agree with the need
to ensure that these skills and technology are maintained in the
UK.
The strategy goes on to recognise the importance
of the defence industry to the UK manufacturing sector contributing
0.5% to GDP. It then goes on to say "There is wide spread
acceptance that the UK cannot compete on low wage activity, nor
should seek to do so". The CSEU is concerned that this sentence
is being taken out of context and to extreme. This sentence may
be valid in the course of low cost manufacturing. However, in
defence there are many other considerations other than straight
cost, such as employment, intellectual property, regional development,
transfer of skills and continuity of supply.
We are very concerned that this statement is
largely responsible for driving a strategy where it is no longer
considered necessary to build all new warships or fleet auxiliary
vessels on shore in the UK.
The CSEU believes this policy is fundamentally
wrong. The construct of hulls and platforms may in some respects
be less skilled than high tech information communications technology
and weapons systems. However, this is still part of modern day
high tech engineering that has a very definite future in the UK.
The skills involved are interchangeable with those of the offshore
sector, engineering construction and the renewable energy sector.
It is vital that the UK keeps a foothold in this sector.
The continued construction of military hulls
in the UK is vital to provide the training and skills in this
sector. It also provides work for a large number of skilled people
in many of the remote parts of the UK.
d) The CSEU also believes that the skills
base in the UK needs improving. At the present time only 30% of
school leavers continue on to university and the Basic Skills
Agency estimate that some seven million of the working population
do not have basic skills in reading and writing.
It is our belief that shipbuilding provides
a large number of the UK population with ability to increase their
skills level to NVQ level 3 via apprenticeships. To allow valuable
work on the construction of platforms to be outsourced to offshore
countries would undermine the skills level and training opportunities
to those not able to go to university in the UK.
e) We note that once the existing orders
for both air and naval platforms have been placed that there may
be no new requirement for new platforms for some time. This will
result in most of the work moving from construction to repair,
adapting, updating and refitting of platforms.
As a result the transition outlined in the strategy
will inevitably result in a smaller workforce who would need to
be better educated and more flexible. We are concerned that the
resources to enable this to happen may not be there.
f) Outsourcing and Offshoring; the CSEU
is not opposed to work being outsourced or even undertaken offshore
when this is appropriate to do so. However, we have very strong
concerns that this is undertaken on price alone or becomes the
automatic choice.
It is our view that lower prices are frequently
only achieved at the expense of the workforce in the areas of
pay, conditions and health and safety etc. Lower standards are
also frequently applied by offshore companies to issues such as
pollution and climate change.
We demand that any outsourcing and offshoring
would only be to companies that genuinely comply with ILO standards
of workers rights, the recognition of free and independent trade
unions, have an adequate health and safety regime and do not pollute
the atmosphere or contribute to global warming directly or indirectly
over and above initially accepted standards.
It had been suggested in a number of circles
that for MARS support ship order that construction of the hulls
would be cheaper offshore in China. The CSEU would strongly object
to this. We would point not only to the low wage, low health and
safety regime where on average six people per day die in coal
mining accidents. We would also point to the pollution and contribution
to global warming that industrial production in China causes.
g) The vast majority of inward investment
in the defence sector is about non UK firms obtaining a foothold
in the UK market through mergers, takeovers and joint ventures.
We believe that the Defence Industrial Strategy with its open
market approach will continue to encourage this.
The CSEU is not opposed to this approach and
in some areas it has been quite beneficial in both providing new
and maintaining existing jobs in the UK. However, we have concerns
that on some occasions this may be undertaken to obtain intellectual
property rights and will result in work and technology being transferred
out of the UK at some future date.
h) A growing concern across all sectors
of the UK economy is the number of UK companies that have been
purchased by foreign competitors in the last year. This has meant
that where new technology and skills are created and where skills
and intellectual property resides, has become more important than
the location of the company head quarters.
i) However, with the potential loss of a
large number of UK headquarters to overseas, where issues of UK
national security may become second to that of the parent company's
country of origin. This along with the job loses is becoming a
concern to the UK economy as a whole. This trend therefore needs
to be reviewed in light of total UK industrial strategy.
j) The CSEU favours joint ventures both
within the UK such as the type 45 vessels and with other European
states such as the EuroFighter (Typhoon) in which there is a clear
understanding of the intellectual property rights, the value of
the joint venture and the number and type of jobs for each partner
is clearly defined.
We strongly believe that any joint venture in
receipt of MoD orders, must not only be considered in monetary
value, but must also consider the value of jobs and intellectual
property to the UK economy.
k) The Defence Industrial Strategy is designed
to cover the next 20 years and needs to have enough contingency
for changes in world stability, technology and UK industrial needs.
l) A big problem of the past for both the
MoD's internal workforce and the private sector workforce has
been the lack of continuity and cyclical nature of the MoD's work
programmes. Even when MoD orders have been placed continuous changes
to specifications have caused major delays in starting work. This
has made planning a coherent work programme and retaining a skilled
workforce difficult.
We are pleased to see the MoD recognises this
in the Strategy and is looking at ways of providing improved continuity
of work.
m) The CSEU believes that where possible
skills and intellectual property must remain in the UK. One of
the best ways of protecting this is to work to ensure that the
MoD is able to undertake some of this work in house, either directly
or in joint partnership with UK manufacturers. This requires the
retention of specialist scientific skills and a good skilled industrial
workforce who are able to respond to new technologies and working
methods. In particular we are concerned at the loss of skills
that are occurring with the proposed closure and transfer of work
from St Athens site in South Wales where there is little alternative
skilled work.
n) The Defence Industrial Strategy will
require a number of changes to the way in which orders for the
UK defence industry are placed and managed. This change should
provide sufficient work for the UK defence industry to plan long
term. In response to these changes the industry must restructure
and rationalise. It is crucial that the MoD and government encourage
industry to deliver this in a progressive fashion which will ensure
the active involvement of the workforce in rising to this challenge.
15 February 2006
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