APPENDIX 2
Memorandum submitted by Amicus
Amicus is the UK's second largest trade union
with 1.2 million members across the private and public sectors.
Our members work in a range of industries including manufacturing,
financial services, print, media, construction and not for profit
sectors, local government, education and the health service.
1. INTRODUCTION
1.1 Amicus welcomes this inquiry and the
opportunity to present evidence to the Committee. The union has
a long history of supporting manufacturing industry and, in recent
years, has campaigned for economic and industrial strategies and
policy to support the manufacturing sector in the 21st century.
1.2 Amicus notes the intention of the Committee
to inquire into a range of specific issues impacting upon manufacturing
and we look forward to contributing to each of these inquiries.
This submission addresses the three areas identified by the Committee,
public procurement, skills shortages and marketing UK plc.
1.3 The submission summarises our views
on these areas and we would welcome the opportunity to expand
on this written evidence should the Committee feel this would
be helpful.
2. EXECUTIVE
SUMMARY
2.1 Public Procurement
(a) There needs to be a greater dialogue
and understanding between government procurement agencies and
UK business. There is evidence that there is very little interaction.
This would be unheard of in France or Germany;
(b) There needs to be a greater understanding
by procurement agencies of the manufacturing supply chain, the
role of SMEs in that chain and the fragility of local capacity;
(c) The UK Government needs to talk to UK
industry and the relevant trade unions to discuss a pragmatic,
sustainable, long-term strategy for key industries within the
sector;
(d) There needs to be a more systematic approach
from the DTI and greater accountability. At present there is little
joined-up thinking or strategic working regarding the various
Government agencies;
(e) Procurement agencies in the UK need to
take on board and give pragmatic advice and support to companies
who lose out on bids but are reluctant to use the complaints and
appeals process to complain about a decision made in a market
they are trying to break into.
(f) Amicus believes that a mentoring system
for inexperienced companies who are looking to enter the procurement
market would alleviate many of the pitfalls and problems experienced
by UK companies all of which are expensive in terms of resources,
time and investment. The mentors would be UK companies experienced
in the procurement process. This would be particularly effective
for SME's wanting to trade with Europe;
2.2 Skills shortages
(a) The mismatch between the skills training
provision that is on offer and what is required by employers must
be reviewed. There needs to be an open and frank debate including
all the stakeholders to ensure that the training on offer is what
is required by manufacturing industry;
(b) There needs to be a significant re-direction
of funding. At present the majority of funding is directed at
FE, to the detriment of Higher Education. If the Government wants
to continue in this vein then there needs to be a review of the
delivery of training from FE to ascertain whether it is effective;
(c) The work of the Sector Skills Councils
has to be subject to a system of quality control if the criticisms
of users are to be overcome;
(d) Union Learning Representatives (ULRs)
have done a great deal to increase basic skills and open up educational
and training opportunities to workers and the current union learning
rep programme needs continuing funding;
(e) Government should match its commitment
to training and acknowledgement of the contribution made by ULRs
by including training in the collective bargaining rights legislation:
(f) There needs to be a detailed analysis
of the learning and skills requirement for specific sectors which
would include a skills matrix and a career map for specific workers.
This would enable career paths to be plotted and enable employers
to see what training needs to be provided.
(g) The UK government needs to show a consistent
and cohesive approach to education and skills in the UK. At present
each new minister brings in different initiatives and reforms,
none of which seem to be demand led. Supply led training provision
is not acceptable and will not deliver a sustainable manufacturing
sector in the future.
2.3 Marketing UK plc
(a) UK Trade and Investment (UKTI) is not
working as effectively as it could. Amicus recommends a "one-stop-shop"
for UK business, not only for information about procurement but
also pragmatic advice about breaking into difficult markets and
ways of circumventing insidious bid manipulation;
(b) Amicus would challenge some of the marketing
proposals contained within the UKTI strategy document "Prosperity
in a Changing World" which lays out its 5 year plan for reinforcing
the UK position at the centre of the global economy.
(c) Amicus would also argue that there needs
to be a focus on the support, development and encouragement of
small and medium sized enterprises (SMEs).
(d) There needs to be a substantial marketing
exercise regarding the value of working within manufacturing and
acquiring the skills, education and training to facilitate this.
More young people need to be encouraged to go into courses that
are science, mathematics or technology based;
3. PUBLIC PROCUREMENT
3.1 In addressing the issue of public procurement,
Amicus notes the government commitment to the process of procurement
for public services in the UK. The annual spend of £125 million
is potentially a significant boost to UK manufacturing.
3.2 In determining the criteria for awarding
procurement contracts government has emphasised a policy of "best
value for money". The way to achieve this and the regulation
that provides for this indicates that it is the tendering bid
that offers "the optimum combination of whole life costs
and benefits to meet the customer's requirements". This does
not mean the lowest price option, it means an assessment is required
regarding the ongoing revenue/resource costs as well as the initial
capital investment. Three new considerations also need to be taken
into account. These are the social, environmental and health and
safety implications of the awarding of a tender contract.
3.3. Amicus would wish to see greater emphasis
placed upon these latter criteria that to date we believe has
not been the case.
3.4. Amicus also notes that in 2003 the
Kelly Report[1]
indicated that there is a potentially wider economic aspect to
procurement in the UK. Better capacity planning on the back of
government contracts, and more effective competition for these
contracts should not only provide value for money for the UK tax
payer, but could show overseas procurers how effective UK companies
are, and encourage them to offer contracts to UK companies.[2]
3.5. The public market across the European
Union is worth in excess of €1,500 billion per annum, representing
16% of European Union gross domestic product (GDP).[3]
For UK companies interested in pursuing new markets in Europe,
the tendering process should offer them an opportunity to realise
their potential expansion in a new market in Europe. This could
enable them to sell their product, create the opportunity to fulfil
contracts in other countries, or enable them to become a significant
player in this new market place. However, less than 10% of public
purchasing in the European Union is accounted for by direct cross-border
trade; where one company based in a member state sells to a buyer
in another state. This is half the amount found in the private
sector.[4]
Indirect cross-border trade where a company sells via a subsidiary
located within the same member state, with their headquarters
being in another member state or outside of the European Union
altogether, represents 30% of European public procurement.[5]
3.6. However, market liberalisation in the
UK is far in advance of other European Union countries. As a consequence
of this, the UK market has been opened up extensively to the companies
of the European Union and many other international companies who
want to tender for the contracts are also benefiting. For example,
Damovo, the American global services company has been awarded
a three year contract with the British NHS purchasing and supply
agency worth £18 million.
3.7. In many respects the procurement process
can have an advantageous effect. In the pursuit of "best
value", the opportunity should arise for the most diverse
and innovative companies to tender for contracts, and the opportunity
for extensive competition should ensure that the "best"
companies come to the fore and are awarded the contracts. However,
Amicus believes this is not happening and is an oversimplified
and na-ve view of what is actually occurring in the European
and global market. Coupled with this is the government's firm
commitment to the free market, competitive tendering and international
competition.[6]
3.8. UK market liberalisation is seen as
one of the key issues affecting UK companies. This is particularly
acute when foreign firms competing in the UK market are state-owned
or state subsidised and therefore not exposed to the same competitive
pressures as UK companies. The degree to which public procurement
markets in Europe are open to UK companies is significantly affected
by a number of key factors. These include cultural differences,
political influence, industrial policy, slow or non-existent market
liberalisation and the decentralised nature of many of the largest
European Union member states. France and Germany both present
problems regarding all of these factors, yet are two of the biggest
markets in the European Union. There also seems to be indicators
that Spain systematically flouts the EU regulations regarding
procurement.[7]
3.9. Cultural differences are particularly
prevalent where procurement is concerned, where buying locally
is the norm and no amount of legislation or regulation from Brussels
will change this. For many UK companies recognising this cultural
barrier has forced them to find alternative ways of working. There
is evidence that a large number have either acquired a smaller
company in the locality to enable them to work within the region,
or have employed agents in the region or industry to smooth their
path or enable them to overcome specific cultural, social or language
barriers. For example, a European Union report found that local
firms win on average 35% of tenders in their home market even
if they are under foreign ownership, while 30% are won via nationally
owned companies and only 25% are won by companies bidding from
a different country with no local connection.[8]
3.10. It is against this background that
Amicus believes the UK Government has to address the UK procurement
market in a more innovative way which supports UK plc and UK jobs.
3.11. Given the structure of the UK manufacturing
business economy and the preponderance of small and medium size
enterprises, (SMEs), Amicus believes that much more needs to be
done to assist SMEs in accessing the procurement market both here
and in Europe.
3.12. The UK Government has invested a great
deal of money and resources into promoting public procurement.
However, despite this investment the failure of the government
to address domestic procurement opportunities is vividly displayed
in its approach to the railway industry and train building. In
a recent report[9]
Europe Economics present a clear case for a more strategic approach
from government (Department for Transport) in the whole procurement
process. The report is critical of the government for failing
to have a single body which takes a strategic overview of the
new vehicle purchasing profile. The net effect of which is huge
fluctuations in orders for new trains, resulting in massive changes
in the workload for rolling stock manufacturers. As a result,
the report finds, manufacturers have been asked to produce some
4,500 cars over the last 10 years and this has now dropped close
to zero for the next three years. The only way for manufacturers
to handle the "feast" and "famine" order placement
is to plan their workload across national boundaries and rationalize
the number of manufacturing sites on a global basis, thus placing
UK jobs at risk.
3.13. The Wood Review[10]
identified some examples of where EU regulations on public procurement
were clearly flouted to the detriment of UK companies seeking
to obtain procurement contracts abroad. Coupled with the strategic
policies adopted by government in respect of UK procurement, the
overall position for UK manufacturing in benefiting from public
procurement in the UK is seriously understated.
4. SKILLS SHORTAGES
4.1. The UK government has clearly indicated
that their manufacturing strategy is designed to create a globally
competitive manufacturing sector, focused on the production of
high value goods and services, and employing a highly skilled
and flexible workforce. The success of this strategy however is
dependent on how the government transposes its training and education
policies into the reality of the world of work.
4.2. At present the delivery of further
education courses, which are the central plank of government provision
for the manufacturing sector, is supply led and not demand led.
UK employers have said time and again that they need to be involved
in the decision making process regarding the vocational courses
on offer and this is not happening. Huge amounts of funding are
going to the further education sector for the provision of vocational
courses, at the expense of the higher education sector, which
is currently being starved of funding and where the number of
students opting to take science based degrees is at an all time
low. There is an obvious mismatch of what is on offer and what
is required by manufacturing industry.
4.3. The government believe that the FE
system is the foundation for a high skills economy, whilst the
funding is biased towards level 2 qualifications. Employers are
being encouraged to raise the level of skills within their workforce
to improve performance and increase productivity. The consequence
of government strategy is the attainment of lower skills at the
expense of higher-level skills evidenced by the Further Education
White Paper published in March 2006 which stated "even if
we achieve all our current targets for raising skills and qualifications
amongst young people and adults, the UK would still end up in
2020 no better than mediocre in the international rankings".[11]
4.4. At the moment research suggests that
employers' expenditure in workforce training is four times that
of the government. The opinion of many stakeholders that this
would not guarantee a future for the manufacturing sector is justifiable.
The trend across all manufacturing industries shows that demand
for level 3 qualifications is becoming the minimum standard. There
is at the same time a drift of potential workers away from the
sector. This could be as a result of continuous availability of
jobs in other sectors at the level where most young people are
eligible for funding resulting in cases of skills shortages in
the manufacturing sector.
4.5. The further education system is continuously
being expanded to accommodate diverse interests of learners and
employers. This has resulted in many courses and qualifications
that are not adequately mapped to reflect clear progression routes
to higher level qualifications. There is also a high emphasis
on the NVQ assessment as the basis. The opinion of many stakeholders,
supported by some academic literature, is that the NVQ is a measure
of the proficiency of the learner on the current job but does
not equip learners with skills for future challenges on their
job and the theoretical background they required for innovative
activities. This has been used to highlight the weakness of the
intermediate level technical workforce compared to their counterparts
in Germany.
4.6. Union Learning Reps (ULRs) have put
learning and skills right back at the top of the agenda in workplaces
across the country. Working with employers, learning providers
and other organisations, they are trained in advising members
on learning needs and opportunities ranging from basic skill needs
to promoting continuous professional development. Union Learning
Reps are providing the opportunity for many thousands of workers
to develop new skills or update existing ones.
4.7. Analysis of the 1998 Workplace Employment
Relations Survey shows that in workplaces where training was negotiated,
almost 40% delivered an average of five or more training days
a year per employee compared to just over 20% of workplaces where
training was only subject to consultation (quoted in The Learning
Curve, TUC, 2006)
5. MARKETING
UK PLC
5.1. 2005 proved to be an exceptional year
for FDI across many of the world's economies, for the UK it represented
an unprecedented level of FDI to the tune of $165 billion[12]
beating the US to the head of the table for inward investment
and representing the largest ever recorded figure for FDI for
the UK. Whilst the benefits of this level of inward investment
are clear the government needs to give consideration to the social,
economic and employment impacts of FDI.[13]
5.2. The role of providing the UK with ever
increasing levels of FDI and the championing of UK companies abroad
is undertaken primarily by the DTI offshoot, UK Trade and Industry
(UKTI). In its key document "Prosperity in a Changing World"
UKTI lays out its five year plan for reinforcing the UK position
at the centre of the global economy. However, Amicus would challenge
some of the marketing proposals contained within the strategy
document.
5.3. Amicus would be keen to know why UKTI
has chosen the City of London and the financial institutions of
the UK as its main focus for marketing. A cynic would say that
UKTI has chosen this sector because they cannot fail to succeed.
The UK financial services sector is an outstanding success story
across the world and the City of London is renowned across the
UK for its generation of wealth. Does it really need further marketing?
Does it really need to be the main focus of UKTI for the next
five years? Amicus would question the veracity of this situation
and ask why UKTI is not concentrating on manufacturing and the
promotion of UK manufacturing industry. UK workers in the manufacturing
sector are some of the most productive in the world and companies
such as British Aerospace and Nissan show what UK workers have
to offer to global companies.
5.4. Amicus would also argue that there
needs to be a focus on the support, development and encouragement
of small and medium sized enterprises (SMEs). These organisations,
while being encouraged to bid for procurement contracts and overseas
contracts, are often excluded from the awarding of contracts due
to the lack of support from organisations such as UKTI.
5.5. UKTI has been specifically set up to
help and assist all UK business, not just those that are already
successful and which promise an excellent outcome in any monitoring
process. This needs to be acknowledged and addressed by Government.
5.6. Amicus would also want to see certain
industries within the UK manufacturing sector promoted and supported
by UKTI. These would include those that are currently employing
high skilled workers such as the aerospace and defence industries
or the telecoms and "sunshine' industries.[14]
27 September 2006
1 OGC Report to the Chancellor of the Exchequer-Increasing
Competition and Improving Long-term Capacity Planning in the Government
Market Place, December 2003. Back
2
Ibid. Back
3
Internal Market Strategy, Priorities 2003-06, May 2003. Back
4
Ibid. Back
5
The Functioning of Public Procurement Markets in the EU: European
Commission, February 2004. Back
6
2004 Budget, Gordon Brown, Chancellor of the Exchequer, "competition
promotes efficiency, controls inflation and creates choice for
consumers". Back
7
The Wood Review, November 2004, p 27. Back
8
The Functioning of Public Procurement Markets in the EU, European
Commission, February 2004. Back
9
Bombardier Transportation: the future of the Derby plant: A report
by Europe Economics Nov 2005. Back
10
The Wood review, November 2004. Back
11
Dfes, Further Education Reform White Paper: Raising Skills, Improving
Life Chances, p 4. Back
12
OECD-Trends and Recent Developments in Foreign Direct Investments,
p 6. Back
13
Amicus-Manufacturing Strategy 2006. Back
14
Industries based around science, innovation and technology. Back
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