Examination of Witnesses (Questions 1
TUESDAY 12 DECEMBER 2006
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
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
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 economyparticularly
financial and business services which are often able to offer
higher wages and are not subject to the same degree of international
competitionare 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
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
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
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
Q19 Mr Hoyle: Do you think that can
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.