Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 20 - 39)



  Q20  Chairman: To be clear, you are talking about the Manufacturing Advisory Service?

  Mr Temple: Yes.

  Mr Radley: There are some early promising signs from the Train to Gain programme. That will be aimed very much at harder-to-reach employers. If one promotes Train to Gain, which has an element of subsidised training, one of its key elements is good quality brokerage to help employers find the training that they really need for their business. If you promote that well, probably alongside some of the other areas of advice that can be provided to business such as the Manufacturing Advisory Service, but perhaps advice on design, energy efficiency and other factors, it will start to make a real difference.

  Q21  Mr Hoyle: If we look at training in the construction industry, that industry brings the trades through. Do you believe that that is a good example?

  Mr Temple: Are you saying that that is because of the levy?

  Q22  Mr Hoyle: I am talking about the training board.

  Mr Temple: We recognise that in one or two areas the levy can work for some sectors. Construction is a good example. One has lots of different people coming on to sites at different times. I think it has been seen to work in the film industry, but by and large we do not believe that this is the right approach. A very large amount of money has already been spent in these areas and what we should concentrate upon at the moment is getting value and a good strategic direction from that spend. To spend lots more money at this stage may well clutter the system even more, and that we see as highly damaging. The really important thing is to make what we do today effective.

  Q23  Mr Hoyle: You want it both ways, do you not? At the beginning you said that there was a real shortage of welders and apprentices and yet in the construction industry which has been subject to a levy apprentices have been brought through so there is continuous training and the skills are being passed on. On the one hand, it has been good for the construction industry, but if welders, platers and people like that had been subject to a levy we would not have had a shortage.

  Mr Radley: But the construction industry has very specific circumstances.

  Q24  Mr Hoyle: But engineering can be the same. You can reflect across engineering because you have admitted that there is a shortage of welders. If there had been a training levy for welders we would not have had a problem.

  Mr Temple: It was the construction industry that suffered the biggest shortage, so your comment is untrue.

  Q25  Mr Hoyle: But construction creates the most jobs?

  Mr Radley: I think that you have to look at particular factors, for example whether a levy would command support from employers. In construction almost 70% of employers support it. One then has to look at the international evidence. Apart from some very limited sectors, the international evidence is not particularly supportive. If you look at a country like Australia, where there is far more centralised bargaining and perhaps a better chance of a levy working well, the evidence suggests that it has led to more training. There has been an increase of more than 20% in the level of training. But if one looks at the outcomes the improvements in productivity are absolutely negligible. Therefore, there is a greater volume but not more effective training.

  Q26  Miss Kirkbride: A recent DTI survey found that level 1 and level 2 vocational qualifications had a negative impact on people's wages and their employability. Can you explain that?

  Mr Radley: You are probably looking in particular at NVQs, are you not?

  Q27  Miss Kirkbride: Yes.

  Mr Radley: One problem is that a lot of these qualifications have not been particularly well promoted. For a lot of employers, particularly smaller firms that do not employ specialists, the issue is that there are far too many qualifications out there and it is very difficult to understand all of them.

  Q28  Miss Kirkbride: What is your view on parity of esteem between vocational and academic qualifications? Should that be the route we go down, or will that not work?

  Mr Temple: Parity of esteem is a very difficult area. There is no doubt that the careers advice being given to young people is not always as balanced and well informed as one would like. Very often that carries traditional connotations in relation to some of the vocational skills that are inappropriate and unfair. Therefore, we need to look at the way we express and value these skills particularly in the advice that is being given. The key thing is to get people to do absolutely the right thing for them but also in the context of what society wants. Regardless of what you are doing, if you are doing it well because it fits you and your capabilities well you will have esteem. Those are the sorts of things where we have to start to make sure that people find the right career that allows them to excel and be a very useful part of our business society.

  Q29  Miss Kirkbride: Your submission also talks about the need for more science and engineering graduates, yet when they do graduate half of them do not go into industry. Is the real problem that graduates are not attracted to industry and that is your fault, not the fault of the system in not producing more graduates in these subjects?

  Mr Temple: There two elements here. We need a lot more science and engineering graduates.

  Q30  Miss Kirkbride: How will you get them to go into industry because half of them are not going there already?

  Mr Temple: First, we need them; second, we need to attract them to industry because they tend to go into other parts of the business world. This is a real problem.

  Mr Radley: We want a bigger cake and a larger slice of it, but we are not uncomfortable with science and engineering graduates going into other parts of the economy. It is very important that people who go to work in the City have a good understanding of science, engineering and manufacturing.

  Q31  Mark Hunter: I want to ask about the changing UKTI strategy. It seems to suggest a significant change in direction for the organisation towards what might be called a more focused marketing-led approach. Do you think that this is the right change, and a timely one, in strategic direction for UKTI? Can you say a little about the significance of that change and perhaps where you think it went wrong previously?

  Mr Temple: We are generally supportive of the new strategy. We see some rather positive elements in terms of the focus on emerging markets. That is very important to us. When we look at today's exporting levels they are disproportionately directed towards the lower rather than the higher growth economies. Therefore, there is a clear benefit in that area. We see the value of more resources in the field and think that is very important. We also feel it is important to give more support to those companies best placed to make a difference in the exporting area. We should not underestimate the importance of export support which lost its position in previous UKTI policies with very strong emphasis on inward investment support. We regard both as being important. But there was real suffering in the area of export support which is very important. All the evidence suggests that it is a part of UKTI's activities that delivers results.

  Mr Radley: One of our big concerns with the way that strategy developed in previous years was the over-emphasis on new-to-exporting firms. There is evidence of links between exporting and productivity, but getting a lot of small firms into exporting may not be appropriate for all of them and it is not necessarily what will give you the bigger bang for your buck. One really needs to support those firms that can make significant inroads into emerging markets.

  Q32  Mark Hunter: Do you accept that this is a significant and fairly fundamental switch of emphasis?

  Mr Temple: Yes, I think it has been.

  Q33  Mark Hunter: If we are to have this new marketing-led focus for UKTI, which apparently will be the way in the future, combined with moves for it to generate revenues by charging more for its services, that will require the organisation itself to adopt a much more entrepreneurial culture than is perhaps typical in the public sector. Do you think that UKTI as presently constituted is up to it? Do the staff have the necessary skill set?

  Mr Temple: First, one needs the regionally-based staff of UKTI to be really expert in understanding the needs of business and identify how it can be helped. What is very important is the key staff in the field who have a good basic knowledge of the market and the available contacts. But there is new emphasis on other support services.

  Mr Radley: If you look at the people in the field, the situation is extremely mixed. Some of them will come from a business background and have those entrepreneurial skills. Our take on it is that certainly a lot of effort is going into it now. UKTI is putting a lot of resources into training up these people and to develop skills in terms of things like targeting particular parts of the market and aggressively selling their services so that they can raise revenue. But there will always be a trade-off for people working in organisations like UKTI in that they have a public service obligation. You will not turn away any segment of customers who come to you; you have to provide at least a basic level of service to all the businesses that have contact with you. At the same time, you will be looking at targeting your services more aggressively on particular segments of the market.

  Q34  Mark Hunter: I appreciate all of that, but does your organisation believe that the staff of UKTI have the necessary skill set to deliver on these new objectives? Are you confident that they can do so?

  Mr Temple: I think we have said that it is patchy and it will take time. There is no doubt that when one talks to companies the quality of the individuals is absolutely key to it working. When one speaks to firms it is interesting that if it is a good story they nearly always give the name of the person that they have been dealing with either in the UK region or in the field. It becomes quite a personal relationship and the good ones are those who excel in every respect. The objective is to develop the individual qualities that we need. Whilst we would like to have it today we have to recognise that these organisations must develop to satisfy the new demands being made upon them. In a way I am always a bit uncomfortable with the word "entrepreneurial" in this regard. I think that they have some real jobs to do and must be up to the task if they are to charge, but "entrepreneurial" implies a slightly different set of abilities.

  Q35  Judy Mallaber: You have welcomed UKTI's decision to focus on emerging markets, yet you point out that a lot of manufacturers tend to see China in particular, and India perhaps to a lesser extent, as a threat rather than an opportunity. Why do you think that UK companies seem less keen to exploit emerging markets than our European counterparts? Is that due just to lack of awareness and information which you have highlighted in your evidence?

  Mr Temple: I think it is very complex. The new emerging markets are generally much more challenging. One must look much more carefully at one's knowledge and ability to export and the amount of investment one can put into exporting to those sorts of markets. Therefore, one can see that a company really must be confident about its export base of skills and product to go and take on some of those challenging markets. One may say that it is the same for some of the other countries that are doing work there, but one should not underestimate the amount of support that they get. Very often they get a very large amount of support—probably more than we get in the UK—to go into those markets.

  Mr Radley: I add two elements. First, what we have failed to do in recent years is to provide sufficient information to companies that look to enter these more complex markets. Second, I think we have lacked visibility. Companies tell us that their experience in countries like China and other emerging markets is that there are lots of high profile and highly visible delegations from other countries led by high-ranking ministers. We do not do enough of that in this country.

  Q36  Judy Mallaber: Is that something that you will be looking to UKTI to organise if we are to make any progress?

  Mr Radley: Yes.

  Mr Temple: If one goes to a country like China, there is a lot of government interest in what is happening to its economy and what other countries are doing in relation to that economy. That is why in those countries a political dimension to give support to UK companies is very important if one is to provide the right atmosphere in which people can push their products and services.

  Q37  Roger Berry: In relation to UKTI's work, presumably in reference to RDAs, you view the regionalisation of its activities as undermining its ability to provide high quality export support and present a clear message to potential investors in the UK. That is a comment that this Committee has made from time to time. Do you see evidence in UKTI's strategy that this problem will be corrected? You talk about stronger coordination, but in practice how do you see UKTI changing what it does in order to address that specific problem?

  Mr Radley: There are significant issues here. We are doing some work at the moment on RDAs in terms of looking both at the quality of their performance and how that varies around the country and the fundamental issue about which things are appropriate to deliver, organise and fund regionally and which things are better done centrally.

  Q38  Chairman: Are you referring to every aspect of RDAs?

  Mr Radley: Yes. I do not believe that we have come to a firm conclusion on UKTI but we probably lean more towards central coordination. There are a couple of aspects of the problem, one of which is very well known. There is a range of RDAs all going out promoting the UK as a place in which to invest but often the focus will be on a particular region and they will aggressively compete with one another. That does not make sense. It is a waste of resources and also sends out very confusing messages to potential investors in this country. What is perhaps less well known is the way that export support has been organised. It makes life difficult for companies to engage with it and also difficult for specialist organisations such as trade associations to engage with RDAs rather than with one national body. We hear stories of companies perhaps only 10 miles outside a geographical boundary that have been excluded from strategically important trade missions simply because they do not sit within the particular RDA's region. Clearly, that cannot make sense. For some companies they will want a coordinated activity where they go out with companies in their supply chain. Again, those companies in the supply chain may be in a different region and may get a different level of funding and are not able to take part in it.

  Q39  Roger Berry: What role do you see for the regions in attracting inward investment? The Welsh Development Agency is always advertising. When I get on a plane I usually find one or two RDAs on the same flight advertising the North East, North West or whatever. From their point of view that seems to be a pretty sensible thing to do. What do you think regions should be doing to promote inward investment? Should they simply be taking instructions from UKTI centrally or have their own initiatives to promote what they see as the merits of investing in their areas?

  Mr Temple: Generally, we think there must be two elements of coordination. First, there must be coordination within the RDAs themselves particularly to headline the approach to UK Ltd and look at developing a sensible way to rationalise between themselves on how to invest around the country. They must do a lot more talking among themselves in relation to that because often we see this as deeply damaging to the image in the country in which they are promoting themselves. That is a problem they must recognise and understand. I believe that that particular matter will be hard for UKTI to cope with unless there is a will within the RDAs to do it and a strong commitment from government that they must sort it out. As to support for export assistance outside the UK, they should be given a very clear role to ensure that there is an element of coordination in that regard. Without support from government to do it that way they will struggle in the argument with the RDAs.

  Mr Radley: It is not just about attracting FDI into this country but making sure it stays here and that the companies that come here make an effective contribution to the economy. A good example of what RDAs are doing is the soft landing schemes which occur in the West Midlands and other parts of the country. One thing that does is broker relationships between businesses that have invested here and universities and scientific institutions, but again a lot of the focus is just on brokering relationships within their particular patch. For many companies the people with whom they need to work may be spread right across the country. They are doing a lot of good things but they need much better coordination of their activities between each other.

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