Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 1 - 19)



  Q1  Chairman: Gentlemen, welcome to the first evidence session of the Select Committee's inquiry into aspects of manufacturing industry. We are conducting a number of separate but closely related inquiries in an hour which will require some discipline from all of us. Thank you very much for your understanding. For the record, I begin by asking you to introduce yourselves and tell us what you do.

Mr Temple: I am Martin Temple, director general of EEF. Obviously, we are a business organisation that provides services to members but also represents them in Europe and nationally on issues related particularly to manufacturing and industry. My colleague is Stephen Radley, chief economist of EEF.

  Q2  Chairman: I begin with what may seem to be a stupid question but is often most interesting: what is manufacturing?

  Mr Temple: It is a good question and it is one which in many ways is quite hard to answer nowadays. Manufacturing has changed quite a lot and it continues to do so and it is responding to very intensive international competition. People tend to talk a lot about competition, but today there is also enormous opportunity internationally. As the Committee will be aware, there has been an enormous shift in the economic balance around the globe. All of the influences of technology that come into play change both the nature of business and the type of products and speed of product life cycles. All of those matters affect the way that business competes. Finally, there is the way that even society views business and how it conducts itself, and essentially that is around the brand. If you like, companies have to protect their reputation and be seen in the modern world as acceptable in many ways. As a consequence, whilst a manufactured product may well be at the heart of a manufacturing business very often it is earning a lot more profitability from things around that product, particularly the service side of the business. Now one sees companies with much greater focus on innovation, design, marketing and the service element of their business. More and more one sees exporting as a major part of any company today. One sees it in the trade figures but also in the way that companies set themselves up. All of these matters put demands on skills within companies which include everything from the traditional things in manufacturing right the way through to the ability to manage global networks, suppliers' agents and detailed working with customers at many different locations. There are lots of dynamics at play.

  Q3  Chairman: What you are saying is that the boundaries between manufacturing and services are effectively breaking down and a company could be classified as a manufacturing company in the UK and not make anything in this country?

  Mr Temple: Certainly there are examples of that. Usually there is a manufactured product at the heart of it, but often the shift in the balance of the number of employees has moved to all those other things around the product. That is why companies have to change shape and the emphasis on the type of skills that they are looking for.

  Q4  Chairman: Presumably, research and development would remain a very important part of your definition?

  Mr Temple: It is a key part. Very often, it is a question of how these companies relate within their organisations from R&D through to how they introduce innovation and develop their products, processes and lead manufacturing and then to marketing, design, recycling and all those sorts of activities. A lot of people regard innovation as traditionally something that comes from an R&D base, which is still true to a large extent, but now one sees a lot of highly innovative companies in the way they present their product to market. It is not only the marketing of the product; very often it is the way they put it to the customer. For example, it is not always a matter of selling the product.

  Chairman: We must not spend too long on the philosophy, but that is an important scene-setting introduction, and I am grateful for those answers.

  Q5  Roger Berry: Over half of your submission comes under the heading of skill shortages. Over the past 20 years half the jobs in manufacturing have disappeared. We all know from local experience that there are people who used to work in manufacturing but who can no longer find jobs in that sector. How do you explain what appears to be a paradoxical situation? Manufacturing needs far fewer people than in the past and yet you say that the key issue is skill shortages.

  Mr Temple: I think that it relates partly to the first comments that we have made today. There is now a vast array of skills needed by manufacturing companies. Within the manufacturing scenario we used to use quite a lot of unskilled labour. Today, we need more and more skilled labour at various levels. That trend will continue right the way through the next decade or so. Therefore, there is a shift from unskilled to skilled and within that there is a changing range of skills. In some areas there has also been a loss of traditional skills, one example of which is welding. We used to have a lot of welders and as a result of the difficulties of industry a lot of that work fell away. We now need those sorts of skills. Therefore, there is a new mix as well as a loss of certain skills.

  Mr Radley: I think we can go into more detail later, but in many cases what has happened is that industry has lost important skills because it has not taken appropriate action. A good example of the opposite is the Rover task force where the great majority of the skilled people were able to find jobs, a fair number of them in manufacturing and others in other parts of the economy. We have perhaps failed to do enough of that in the past.

  Q6  Roger Berry: In paragraph 27 of your submission you draw attention to EUROSTAT data and say they show that UK employees are among the most trained in Europe, although in your report Skills for Productivity, as I recall, you suggested that one aspect of the problem was that there was a gap in skills between the UK and other European competitors.

  Mr Radley: To answer it properly one must unpack it. There are some issues about attracting sufficiently qualified people to manufacturing, due in part to the fact that too few people take science, technology, engineering and mathematics subjects at school and in higher education. There are issues about careers advice and probably about promoting the image of manufacturing. There is a range of issues about getting sufficient numbers of people to take the subjects and develop skills that manufacturing needs and getting them to work in that industry. As to our paper, we have found from our researches based on the Sector Skills Development Agency, the labour force surveys and the EUROSTAT survey mentioned in our paper that companies in manufacturing and business generally are highly active in training, but there are issues about the effectiveness of that spend. In many cases we have found that too many companies, particularly the smaller ones, do not link what they do in training sufficiently to their business strategy. In some cases the money that is spent is not expended as effectively as it could be.

  Q7  Roger Berry: Before we come to what companies themselves do, you quote evidence to show that UK employees are highly trained. Is the problem that these employees do not find manufacturing interesting or that they do not have the very specific and particular skills required for modern manufacturing?

  Mr Radley: I think it is a range of issues. In part it is to do with the image of manufacturing. In some cases where one is looking at people with very high levels of technical skills other parts of the economy—particularly financial and business services which are often able to offer higher wages and are not subject to the same degree of international competition—are very well placed to attract some of those skilled people. That makes life hard for manufacturers in terms of competing to get them. Manufacturers' skill needs have also changed so one is aiming at a target that is moving quite fast. What companies tell us now is that they are looking for people with personal skills, which are often referred to as "soft skills" but that probably does not do them justice. It is a question of commercial awareness, problem-solving, team-working and things like that. By "team-working" we mean the ability to work together in multidisciplinary teams, bringing a range of different skills to develop a proposition for the customer.

  Q8  Roger Berry: Are other European countries doing better than we are in terms of meeting manufacturing sector skills; and, if so, how are they doing it?

  Mr Radley: If you look at some of the international comparisons and analyses just released in the study by Lord Leitch, there is certainly evidence that there are more people qualified particularly at the intermediate level in other countries and countries like Germany are ahead of us. Looking at more recent evidence, even at very high levels of unemployment a lot of German firms are now also reporting skill shortages.

  Q9  Mr Hoyle: You mentioned a shortage of welders, platers and people like that. I understand that. Do you not think that the industry itself has something to answer for its failure to train people?

  Mr Temple: When one looks back at the history, there has been an enormous reshaping of manufacturing industry. It has had to change its relative size and the areas which it has concentrated upon. Inevitably, there were some difficulties around that. Some of those traditional skills were lost in that period, and we have acknowledged that there have been issues in that regard. That is why we now have to address some of these things.

  Q10  Mr Hoyle: I note that this year a Manufacturing Forum conference took place and quite rightly delegates expressed their view. Do you agree with delegates who called the sector skills councils "a waste of time"?

  Mr Temple: We certainly would not say that the sector skills councils are a waste of time. In the whole skills agenda we believe that the preferred emphasis is to develop below what might be called the generic levels of skills across all sorts of sectors and types of business. The greatest emphasis should be upon the development of those sector skills areas and the councils have a big role to play there. A number of them lack critical mass and do overlapping things. We could perhaps see a reduction in the number of the sector skills councils to give them greater resources, power and influence to develop that activity on behalf of businesses down the sectoral routes. We are rather supportive of that kind of approach and to that extent supportive of sector skills councils. In the whole scheme of things they are relatively new and have a big task ahead of them, particularly as, following the Leitch report, they will play a much bigger role in the way the money is spent.

  Mr Radley: One of the problems that the councils have had to face is that there are too many parties involved. It has been very difficult to get a demand-led system going that reflects the needs of employers. One of the most valuable recommendations of Leitch, which we hope to see implemented, is that the sector skills councils will have a much greater degree of control of the funding and only qualifications that expressly meet employers' needs will receive funding in future.

  Q11  Chairman: Just to clarify it, you are more sceptical about the regional skills partnerships, are you not?

  Mr Temple: That is correct.

  Q12  Mr Hoyle: You slightly disagree with the delegates, but that does not matter. To move on to Lord Leitch's report, what impact will his proposed reform of the skills system have on manufacturing? Will that report help manufacturing?

  Mr Temple: We think there is a lot of good stuff in the Leitch report, particularly the point about the sectoral approach which we have just covered. He talks quite a lot about clearing up the confusion in the landscape of supply, of which we are very supportive. He also recognises the demand end of it, that is, helping both the identification but particularly the quality of provision. Those have been issues for us in the past. If the Leitch proposals are followed much of that should start to come into play.

  Q13  Mr Hoyle: If I have it right, you stress the need for a demand-led skills system. How can such a system ensure that the industry's long-term strategic needs are recognised?

  Mr Radley: The first point is that we are a long way from a demand-led system and need to do a lot more work to make sure that happens. In terms of looking at longer-term needs, that will probably be a job for the new Commission for Employment and Skills which will have an overarching role to look at where manufacturing is going; which are the markets in which it will be competing; which are the products and services that it will be developing; and what demands that makes on skills in areas such as innovation, design, marketing, technical matters or whatever. We need a body that has an overarching role, and that is probably where the sector skills development agency has failed to punch its weight so far.

  Q14  Mr Hoyle: Do you agree that companies do not take a strategic view on training or the right approach to it?

  Mr Temple: Quite a lot of companies are absolutely superb, particularly the very big ones.

  Q15  Mr Hoyle: The majority?

  Mr Temple: No, but they employ a lot of people in the manufacturing workforce, so there are a very large number of good exemplars. But it is true that particularly the small to medium companies spend quite a lot of money. How much they are spending will come very much as a surprise. It is not always linked to company strategy. Because they are small and do not have specialists they do not always have the expertise to identify the training gaps. We believe that perhaps through MAS-plus,( Manufacturing Advisory Service) and the new skills academy for manufacturing, if it really picks up in the right area, companies can be helped to identify the strategic training needs and link up to much better orientated training providers. Organisations like Investors in People, which have fallen behind a wee bit in the past few years, could be very helpful here. To go through that process a company has to look at its strategy and how the training needs of people start to match and deliver that strategy. If that can be linked into companies it will be helpful. We have to try to persuade companies of its value.

  Q16  Mr Hoyle: Presumably, there is recognition that apprenticeships can play a major role in that?

  Mr Temple: Of course.

  Q17  Mr Hoyle: What would you say if I told you that one third of manufacturing employers do not train their staff?

  Mr Temple: We would say that there are very large numbers of employers who are training their staff. By all estimates, they are spending £33 billion a year on training. We would put very big emphasis on trying to ensure that we improve the quality of training and value for money spent. We also see real value in the individual learning account-type approach where people see the value of it and the responsibility on them to push themselves forward and make sure companies recognise that and encourage them to take those opportunities.

  Q18  Mr Hoyle: My colleague across the way keeps shouting "Not true!" It was the Labour Force Survey that came up with that statistic. How can the smaller employers in particular be persuaded to invest in the right areas of training? I think you are absolutely right that they do spend money on training but it may not be the right training.

  Mr Temple: That is the point we are making.

  Q19  Mr Hoyle: Do you think that can be achieved?

  Mr Temple: I think it can. They are committed to it in some form and it is a matter of giving them the right assistance. These are people who have relatively little expertise in evaluating these things. We think that it is possible. If you look at the approach of things like MAS and MAS-plus that is where you start looking at the detail in the smaller companies. They can be helped in a practical way to identify their training needs, particularly to embed some of the things that they have learnt in their MAS programmes. I believe that it is very do-able.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2007
Prepared 18 July 2007