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Midlands Engineering Industries Redeployment Group

1.28 pm

Mr. Mark Todd (South Derbyshire) (Lab): This debate is focused on a service that I support for two historical reasons. First, at one stage in my business career I had to handle a large-scale redundancy exercise. The task of dealing with just more than 60 people and their various experiences of what was mostly a traumatic event in their lives taught me that expert resources are required to assist with a redeployment of personnel caused by changes in company strategy or, worse still, by dramatic changes in the viability of a business.

At that time, my company was wise enough to employ dedicated, skilled, outside teams to provide that support, but many businesses choose instead to handle those tasks from within their own resources. Often, they do it cheaply and without the level of expertise that is required to deal with the very different responses that many employees have.

That was a personal background. The second reason is that I took part in the Rolls-Royce taskforce after the events of 9/11 when there was, predictably, a dramatic reduction in the marketplace for aircraft engines. Rolls-Royce, many of whose employees live in my constituency, had to downsize its business sharply and announced redundancies. That exercise not only introduced me to some of the techniques that were available to a forward-looking business such as Rolls-Royce to deal with such circumstances—they were impressive, and I commend them—but highlighted a tragedy. Here was a world-leading company with fantastic employees who had tremendous skills in engineering, but at the end of exercise, which was extremely successful in finding employees other occupations if they wanted them, 70 per cent. of them found their future earning potential outside engineering, so many of those incredible skills were lost to the sector and to our economy at large. It struck me at the time that we could surely do better than we did even with the tremendous work that Rolls-Royce put in and the resources that it set aside to help people find new careers.

Why is this subject important? I am someone who does not believe that our economy will be based on selling mobile phone services in the future. I think that we will have to make things and that our expertise and heritage in engineering is not a liability but a strength that we should build on. Analysis of the skills need in our economy shows that hard-to-fill vacancies are particularly high in engineering-related activities such as metal production, construction and vehicle maintenance. When we analyse the skills shortages reported by employers, exactly the same picture emerges, a picture with which we are familiar on an anecdotal basis, that it is increasingly difficult to obtain high-level skills, and that many employers have to compete vigorously to obtain those skills. Yet, it came back to me how many of those people had drifted away from the sector to find other occupations, perhaps because they were not given some basic support that would have enabled them to stay.

A resource is being wasted at a national level—a resource that surveys within the industry show is required. Let us look at the problem strategically. The traditional experience of long-term employment with one employer
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is long gone and we should not regret its passing. We will increasingly see work forces flex according to market conditions; that is the only way for us to maintain competition in our country. The ability to produce competitive products and to innovate into the future will rely on a substantial amount of that flexibility, so there is no point in mourning the past. However, we will increasingly find more cases in which companies have to change direction, alter their work force profile and reduce head counts, often at the same time as other people are looking for similar skills. They may not be looking for precisely the same skills, but they might be close enough to be abridged by appropriate training.

The Anglo-Saxon model of industry implies competition over the work force, the raiding of other organisations for trained staff, and limited intelligent sharing on labour requirements beyond the limited surveys that I have quoted from because many people would see it as giving some competitive advantage to a competitor. The outcome is that training is not seen as a long-term commitment and that skills are lost in transition. Companies will lose those skills as they change and many of those skills will be lost to the sector altogether because there is not proper information sharing at appropriate times. In the more dirigiste continental model, there is much greater direct state intervention to subsidise the labour pools in which displaced employees are held awaiting future vacancies and are subsidised by the state. That is extremely costly, blunts the whole process of management and removes accountability, which is not a desirable outcome either.

The Midlands Engineering Industries Redeployment Group attempts to address this issue using the theory of clusters and by looking at businesses of common interest who can share information and support one another on matters that are not critical to their competitive advantage. The Minister will know that much of the theory on clusters stems from Italy and focuses on groupings such as the ceramic industries of northern Italy, which have been highly successful partly because they share large amounts of intelligence and compete only over certain aspects.

MEIRG has established a voluntary cluster network for fostering information exchange to facilitate labour planning and provide modest, targeted state aid in training and redeployment expertise. The costs are limited: about £500 per individual. That is modest indeed compared with how much my company paid for various expert services, 15 years ago, to support people in a major redeployment exercise. In just two years of existence, MEIRG has established a network of 520 employers across the midlands with interest in this sector. Some 380 employers have received some assistance from it, and nearly 3,000 employees who were affected by structural change have been given help. More than 800 employees have been helped with specific skills development, which involves identifying through personal interview the kind of skills that they need to acquire to enhance their ability to remain in the sector or close to it.

As a result of that work—I said at the start that 70 per cent. of the employees who were displaced from Rolls-Royce in 2001-02 left the sector—the retention rate in the sector in the cases in which MEIRG has intervened is 50 per cent., on average, and has reached 80 per cent. in some cases. Obviously, those figures vary, and it is difficult to measure these things tremendously
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precisely because the mix of skills will inevitably vary from business to business, as will their ability to port those skills around. Nevertheless, it is an encouraging and substantial improvement on previous experiences even those with high-quality employers such as Rolls-Royce, which invested a substantial amount of money in helping employees to move on.

MEIRG provides highly skilled people and a low-cost, mobile, internet-based service. Basically, a big truck turns up at a company and locates there, and interview facilities, support and advisory functions are provided to the employees who are affected. That has been shown to work well, as many employers in such circumstances do not have the capacity to do such things. Training is then procured on the basis of a personal assessment. There is not a quick-fit, generic approach but instead a personal assessment of the individual’s needs and the kind of things that they are prepared to commit to, and then training is procured from third parties.

The scheme received a commendation from the European Restructuring Forum as an example of best practice in Europe, and I could give many individual references. I shall pick just one from a Saint-Gobain employee who benefited from the programme. I shall not name the gentleman involved. He stated:

I do not know what that is, but I am sure that it was important to him, and that is the point. He concluded:

I also have several testimonials from employers who have worked with MEIRG. There is no compulsion involved. Employers do not have to use the service or join the network. They do so from choice and because they believe that they work.

At present, MEIRG is working with the Lear Corporation—I believe it makes car seats—in Nottingham, where 500 people will lose their job, and it has assisted in recent large-scale redundancies in Leicester and Chesterfield. MEIRG has had critical input from Rolls-Royce—it is no accident that there is a linkage. Key personnel give their time freely to it, and the experience that I referred to—the large-scale downsizing at Rolls-Royce—was obviously one of the influences in establishing the service. My own union, which is now called Unite—it was probably still called MSF when the scheme was first considered—has been strongly supportive in a general sense but also in providing key personnel who give their time to support MEIRG. There is consensual activity across the brief: employers and trade unions reflect on the work and recognise its importance and value.

I would like to pay tribute to the people who have given their time: Phil Derges works at Rolls-Royce but makes a substantial input, my constituent Mark Tiltley, who is a Unite representative, Jan Staley, who is the project manager of MEIRG, and her deputy, Jane Kenney. They provide an excellent service.

I have told Members how good the service is. Now, what do we do about it? Why should we care? First, funding is not guaranteed. MEIRG is currently seeking continuance support from the two regional development agencies for the midlands. I would welcome the Minister’s
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noting my and my colleagues’ strong support for the organisation, and carrying it to the agencies when they reflect on bids. At present, uncertainty is placing future work at some risk.

Secondly, we need to reflect on the example and the successes. The fact is that MEIRG shows that such a scheme works in engineering.

Paddy Tipping (Sherwood) (Lab): I join my hon. Friend in commending the work of MEIRG. It is an excellent, professional organisation. My hon. Friend has not mentioned the work that it does in schools to persuade students that engineering is a good profession. The paradox is that European funding is available, but unless the East Midlands Development Agency and Advantage West Midlands make decisions quickly, the project will have short-term financial difficulties. I ask the Minister to speak to the two development agencies.

Mr. Todd: I thank my hon. Friend and would repeat what he says.

I was saying that the scheme provides an example to other sectors. If it works in engineering, it could work in other sectors, too. And, obviously, if it works in the midlands, it is logical that it would also work in other parts of our country. We have much to learn from the experience, and it offers models that we can use in the future.

1.45 pm

The Minister for Competitiveness (Mr. Stephen Timms): I begin by congratulating my hon. Friend the Member for South Derbyshire (Mr. Todd) on securing this debate. He made a good case for the value of the work of the Midlands Engineering Industry Redeployment Group, and I am pleased to have the opportunity to respond.

There is no doubt at all about the continuing importance of engineering to the nation’s economy. One of the things that I have found encouraging since taking on the role that I have played since June is the extent of the growing recognition around the UK among organisations such as the Engineering Employers Federation that engineering and manufacturing are doing well. The UK is the sixth largest manufacturing economy in the world, and there is a growing sense from evidence, not just from the EEF but from the CBI and the Chartered Institute of Purchasing and Supply, that the industry is doing well.

It is striking that today the UK makes almost twice as many cars—some, of course, in the east midlands—as it did 25 years ago. That is one of the points that I shall make tomorrow at the lobby on manufacturing that will be held at Parliament. Unite, the trade union to which my hon. Friend referred and of which I, too, am a member, will be involved in it.

The industry is particularly important to the area in and around my hon. Friend’s constituency. There is a cluster of world-class engineering companies there. They are of the greatest importance—he made several references to Rolls-Royce—and make a substantial contribution to the economies of the locality and the region. I have
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some figures: in the east midlands region, the engineering sector accounts for about 6.5 per cent. of the region’s gross value added, which is, contrary to what people usually think, a higher proportion than was the case 10 years ago, when it was 6.3 per cent. The regional development agency forecasts that growth in value added in the engineering sector will be higher than the economy-wide average during the next decade. The latest estimate is that engineering accounts for 4.5 per cent. of full-time equivalent employment. In the east midlands, that is expected to increase slightly to 4.9 per cent. in the next decade. There is no doubt at all about the importance of the sector in the regional economy, and it is important as well to recognise and, indeed, to celebrate the growth in the region.

However, my hon. Friend is right to remind the House of the structural change that has affected the industry. That is why I am pleased that we have been able to have this debate and that the House has had an opportunity to learn lessons from the experience and success of MEIRG. The debate has shown the real advantages of partners coming together to find a way to develop and deliver a service that is widely recognised as having a major impact on competitiveness and on the long-term future of companies’ employees. I would like to join my hon. Friend in congratulating Unite and the other partners involved in MEIRG on their efforts and achievements. My hon. Friend mentioned a number of achievements, which impress me. Almost 3,000 people who were faced with structural change in the industry are being supported and more than 800 of them are being helped to develop skills. Almost 400 employers, mostly small and medium-sized enterprises, have been assisted. As my hon. Friend said, sector retention rates have been 50 per cent. routinely and sometimes up to 80 per cent. compared with a more typical figure in the industry of 30 per cent. It is not surprising that MEIRG has been selected as an example of European best practice in the management of structural change.

My hon. Friend reflected on his own experience of serious and difficult restructuring in a firm in which he worked. It is right to acknowledge how hard it is for people who are affected by restructuring exercises. He quoted one of the people who has benefited from MEIRG’s work, and I noticed another:

That conveys some of the emotion surrounding matters such as restructuring that we talk about rather forensically, but which create difficulties for and affect the lives of a large number of people.

In discussions with members of some of the Scandinavian social democrat parties they said that if they cannot save particular jobs, they can save people. That is the idea behind the initiative. There will be change and restructuring because of the pressure of globalisation and the ferocity of international competition facing engineering and other UK industries and companies, but we must support the people who are affected by that restructuring, and MEIRG has done an impressive job.

My hon. Friend was right to point out the need for continued flexibility, and that will be no less prominent in the engineering sector in the next few years than it was in the past few years.

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I mentioned figures showing that growth in the engineering sector in the east midlands is set to continue. A number of economic challenges face the sector in the region, as well as throughout the UK. Recruitment issues regionally, such as hard-to-fill vacancies, are significantly higher than the UK average, and skills gaps are evident in a number of key subsectors, including mechanical, aerospace and materials.

I join my hon. Friend the Member for Sherwood (Paddy Tipping) in paying tribute to MEIRG’s work with schools to encourage young people to consider a career in engineering. That is an important task for the next few years. Engineering and manufacturing do not have an attractive image for people in schools. We must change that, and ensure that the image reflects the reality of the impressive successes in the sector in the east midlands and elsewhere.

International macro-economics and shifts in labour patterns have heightened the vulnerability of engineering companies, particularly those with an international profile, to labour market opportunities in other countries, such as eastern Europe and further afield. Rolls-Royce has recently decided to relocate a research and development facility to Dresden rather than in the UK.

There is absolutely no room for complacency. My Department recently consulted on business support simplification because we want to declutter the large number of streams of publicly funded support available to business, which have been estimated to be around 3,000. We want no more than 100 by 2010, and we want to ensure that support is demand-led, and that it matches the needs of employers and their employees. Intervention in recruitment and redeployment will certainly be part of the package of the retained streams, and although they are designed primarily to help individuals, they encourage businesses to recruit from groups that would otherwise be disadvantaged, so they assist in companies’ recruitment and challenges.

Lessons can certainly be learned from MEIRG’s experience, and applied more widely. The internet-based redeployment facility has been impressive, and allows individuals to know about a wide range of engineering-related vacancies and employers to advertise current job vacancies. That has worked well, as has the mobile resource centre—I understand that it is known as ERIC—to which my hon. Friend the Member for South Derbyshire referred. It can be located with a particular company to provide extensive training facilities and sophisticated technology. It can also be used by companies experiencing restructuring and at short notice to provide redeployment advice and services to businesses and employees. Two examples of individual testimonies have been given in this debate, and I have read other feedback from users, including employers.

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At national level, the National Skills Academy for Manufacturing, which was set up in January 2007, is working to raise the sector’s global competitiveness by developing top-quality, fit-for-purpose solutions to training and development needs. There is no doubt that we need more of that in future. Like MEIRG, its focus is delivery-led, and aims to meet employers’ needs and to add value to their businesses. The East Midlands Development Agency is investing £429,000 in a three-year initiative to develop a regional branch of the National Skills Academy for Manufacturing. That important initiative will be chaired by Rolls-Royce and supported by a range of businesses, together with the university of Derby and Derby college.

We are committed to ensuring that the support that businesses need is available to them when they need it. The model that MEIRG has pioneered and developed has been an important addition to our understanding of what needs to be done, what can be done and what works in restructuring with innovative approaches to redeployment, reskilling and upskilling. I am pleased that the European Union’s EQUAL programme and EMDA have been able to contribute financially to MEIRG, thereby allowing new approaches to be tried, tested and developed. We must learn from that. Support for business as a result of the business support simplification programme and the Leitch review objectives on skills provide extra focus on the areas on which the Government should concentrate. I recognise that this is certainly one of them.

My hon. Friends have spelt out clearly their aim to ensure that funding for MEIRG continues beyond its current cut-off point in March next year. I cannot offer any commitments on funding, but I note the point that my hon. Friends made, and can go a step further and say that I will write to the chairs of the two RDAs involved to draw their attention to this debate and to my recognition of the importance of MEIRG’s task. We must then await the decisions that those two bodies will make now that their spending settlement has been announced in the Chancellor’s pre-Budget statement last week.

I acknowledge that MEIRG has substantial support, as this debate has demonstrated. There is a desire to ensure that the good practice that it has developed is not lost, and I know that consideration is being given to securing funding to take the project beyond 2008. I can only wish those efforts success, and thank my hon. Friends for taking the trouble to draw the Government’s attention to MEIRG’s achievement.

Question put and agreed to.

Adjourned accordingly at two minutes to Two o’clock.

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