Examination of Witnesses (Questions 20
TUESDAY 12 DECEMBER 2006
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
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
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
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
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 supportprobably
more than we get in the UKto 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
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
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.