APPENDIX 4
Memorandum submitted by the Birmingham
Chamber of Commerce & Industry
THE FUTURE OF MANUFACTURING INDUSTRY IN THE
UK: SKILLS SHORTAGES
The House of Commons, Trade and Industry Select
Committee launched an inquiry into the skills shortages in UK
manufacturing on 24 July 2006. Birmingham Chamber of Commerce
(BCI) conducted a survey to elicit the views of its manufacturing
members from across the sector to gather views on the committee's
inquiry. The results of the survey are detailed in this submission.
INTRODUCTION
Manufacturing continues to play a key part in
Birmingham and the West Midlands economy. BCI has over 500 active
chamber members in the manufacturing sector and there are over
3,500 manufacturing businesses in the Birmingham and Solihull
area, employing over 60,000 people. Although 98%[18]
of these companies are small to medium sized enterprises (SMEs)[19]
the sector accounts for nearly 30% of the gross value added economy
in the region.[20]
Employment is set to fall in the sector by 24%
between 2004 and 2015, from 65,000 to 49,000 jobs and it is expected
that there will be a demand for higher skilled jobs as the sector
diversifies to compete nationally and internationally.[21]
Despite this the sector's productivity is forecast to remain above
average and even with a fall in employment rates, the sector remains
a substantial employer in Birmingham.
Due to the extent of the sector's presence in
Birmingham and the West Midlands BCI believes that it is well
placed to discuss the key issues for the sector both from a local
and national perspective. In addition, BCI and Accelerate worked
alongside Advantage West Midlands (AWM) in the recent closure
of the MG Rover plant to deal rapidly and efficiently with the
supply chain and skills issues.[22]
BCI POSITION
Skills shortages are an immediate issue of economic
sustainability for manufacturing and for it's future in the West
Midlands and UK. Skills attainment is directly linked to the development
of the sector's image and confidence.
There is a clear and pressing need to develop
the skill levels in the students of all ages and the workforce
to both ensure employability in the future and also the current
productivity and efficiency of the sector. A universally coherent
careers advice service is also paramount in solving the sector's
skills shortages.
Management skills are key to the sector. The
ability to forward plan and acknowledge the importance of workforce
training are vital skills needed within the sector and should
be developed and encouraged by Government.
There is still a lot of work to be done around
improving dialogue between industry and education. Government
organisations and partnerships are proving successful in involving
larger businesses but in the particular interest of the manufacturing
sector, predominantly SMEs, there is more work to be done.
Government provision must focus on how to involve
those businesses that are struggling to engage at present.
BCI RESEARCH
There is no doubt that the manufacturing sector
is facing a serious skill shortage. In a recent BCI survey 96%
of businesses stated that they believe the sector is facing major
skills shortages.
It is also clear that skills shortages are having
a direct impact on the productivity and profitability of manufacturers.
74% of respondents noted that productivity was affected by skills
shortages and 63% of businesses noted reduced profit margins in
line with their skill shortages. Therefore, skill shortages are
directly affecting the sector's capacity to manufacture. Future
planning and management are proving more difficult with the immediate
pressures businesses are facing, both from Government regulation
and general economic trends such as rising international competition.
14-19 YEAR OLD
AGENDA
Skills development around school age students
will be paramount for the future skill needs of manufacturing
due to the changing demographics of Birmingham and the region.
This can be seen through the West Midlands Regional Observatory's
latest research, which found that there will be 96,000 manufacturing
vacancies due to retirement and career moves from 2004 to 2014.[23]
In addition, between now and 2028, the number of under 20s in
Birmingham and Solihull is expected to grow by 20,400 and will
be predominantly from ethnic minority groups.[24]
Although we face a younger and more diverse
work force there are major concerns over the skill levels of school
leavers. In the UK only 44% of school leavers gain five GCSEs
at grade A* to C including English and maths.[25]
Manufacturers are concerned at the number of new employees who
lack basic skills in numeracy and literacy, as well as generic
skill such as, presentation, organisation and attitude.
The Government's 14-19 White Paper 2005 introduced
specialised vocational diplomas in 14 subject areas (including
manufacturing) offering a new vocational pathway in 2008 in an
attempt to address the problem of low skill levels. Each student
undertaking the new vocational route will require a work placement
for up to two days per week for two years. The success of the
new qualification is vital to both filling the sector's future
skills needs and improving the image among the young of the manufacturing
sector in Birmingham, the region and UK.
However there are major challenges facing the
establishment of the new manufacturing diploma. A key failing
of the manufacturing GCSE introduced by the Government two years
ago was the lack of business support for the work experience requirements
of the qualification. This new diploma must be matched by efficient
engagement from manufacturing businesses if it is to be successful.
Worryingly, the majority of manufacturers still do not engage
with schools. Only 30% of manufacturers respondents to BCI's survey
stated that they were involved with local schools and 70% believed
the relations and dialogue between the sector and education was
poor to very poor.
Greater manufacturing engagement with schools
would undoubtedly improve both the image and skills attainment
in the future workforce. 85% of respondents to BCI's survey believed
that improving skills related to the sector in schools would improve
the image of manufacturing. The Government must work with organisation
such as Chamber network to ensure employer engagement in all stages
of the diplomas implementation if they are to be successful.
In addition, unbiased and well-informed 14-19
careers advice must be facilitated to ensure the opportunities
that the diploma offers are relayed to students effectively. The
Government must ensure that the diploma is not considered a second-class
qualification as GNVQs and NVQs have been in the past. The Government's
implementation stage will be critical in ensuring the diploma
is not treated as a subordinate qualification to GCSE and A-Level.
Although the sector is currently facing skills
shortages in school leavers there are initiatives under way in
the region to facilitate manufacturing communication with schools
to improve the situation.
Case Study
"Create a Future" is a leading,
non-profit skills initiative in Birmingham and West Midlands.
Their main objective is to improve the image of manufacturing
and engineering among 14-19 year olds, also developing in them
the skills needed for the sector such as, numeracy, literacy and
more generic skills.
Through funding made available by SETNET, Create
a Future funds the training of Science and Engineering Ambassadors
who in turn work with schools, showcasing sector opportunities
to students and taking part in practical lessons. The initiative
has been extremely successful in bridging the gap between the
sector and schools but Carole Gallant, Director, Create a Future
highlights the future challenges for the initiative:
"Our Government funding is ceasing and
we need to ensure both continued support from Government and business
to carry on the good work of Create a Future. We need to expand
our activities to 10-14 year olds as it is evident it is at this
stage that they start to make important decisions in regards to
the direction of their education".
WORKFORCE DEVELOPMENT
Manufacturers tend to concentrate on immediate
staff training, with 82% of respondents to BCI's latest survey
declaring that they train staff. However, this does not match
up to to the skills shortages constantly expressed by businesses.
Numeracy and literacy are the two most important skills needed
by most business respondents to the BCI survey. This correlates
with recent figures, which show that there are up to 12 million
adults in the workforce with literacy skills and up to 16 million
with numeracy skills at or below the level expected of an 11 year-old.[26]
In addition, management skills will be crucial
to the future success of the sector, as it will be these skills
that determine workforce development planning. 89% of business
respondents noted that management and leadership skills were increasingly
important in their businesses success. Manufacturers need to balance
the competition from low cost economies abroad with rising pressures
at home such as rising energy prices and Government regulations
such as the annual national minimum wage increase. The business
environment that manufacturers work in today requires a multi-disciplinary
approach to management and workforce training is of paramount
importance to forward planning.
Government and manufacturers must also acknowledge
the increasing impact of migrant workers from Eastern Europe on
skills shortages in the sector. With English being their second
language there is a need to ensure that migrant workers are efficiently
trained to understand technical English in the manufacturing sector.
Although there is a lack of higher-level management
and leadership skills at present there are initiatives that can
assist businesses in workforce development and more must be done
on ensuring businesses are aware of the existing support on offer
to their business.
Case Study
Operational from November 2005, Midlands Engineering
Industries Redeployment Group (MEIRG) is striving to ensure the
region retains and develops a pool of engineering and manufacturing
talent. MEIRG's main activities include, re-training and funding
for training in sector related skills, offering secondment opportunities
and mobile resource centre for both employers and employees. The
Group also assist in "redeployment" through CV writing,
support with interview skills and finical management. In addition,
employers are offered an online recruitment resource to assist
in effective recruitment processes. This is all done through a
mobile Engineering Resource and Innovation Centre which facilitates
rapid, cost effective, highly focussed interventions to support
employees faced with career change or who wish to re-train.
The group's main aim is to retain experienced,
skilled and professional workers in key areas of the sector and
economy affected by structural change. The group is truly unique
in the UK and is aiming to be rolled out nationally on a regional
basis if it is successful.
MEIRG has helped nearly 1,000 people prior to
redundancy and over 200 through career changes (the majority,
who are aged 45 or over). MEIRG has also ensured that these people
remain within the target sector and economically active. MEIRG
is part funded by the European Union Equal Program and the East
Midlands Development Agency.
ADULT INFORMATION,
ADVICE AND
GUIDANCE (IAG)
As the statistcs in the introduction described,
job secruity will to a certain extent decline in the manufacturing
sector. It is well understood that future entrants to the labour
market are likely to have a number of jobs in their career. The
outer wards of Birmingham will, on average, contain individuals
of a much older age profile in coming years. Between now and 2028,
the population of over 40s in the sub-region will grow by 74,300.[27]
In response to this the Government has introduced Age Discrimination
Laws in October 2006 and this will also affect the demographic
make up of the workforce enabling older workers to work for longer.
As the retirement age increases and sector employment
changes it is important that we ensure that there is an effective
IAG system for those beyond the age of 19, who will need high
quality information and support in their future employment and
training needs.
A culture of lifelong learning must be fostered
in the sector to ensure that the workforce is constantly attuned
to the skill needs of the sector and the economy. There are examples
of good initiatives in Birmingham and the surrounding region such
as the careers advice provided by MEIRG mentioned in the above
case study for the Government to build upon.
However, despite the good work being done in
pockets of the city and region, a single adult IAG would offer
an effective education outlet for lifelong learning training.
At present Next Step and Learn Direct are working on adult IAG
but their funding is limited and there is a great deal of confusion
among businesses and individuals where to access the relevant
career support and guidance.
The Government must examine in detail the requirements
of an older workforce, which must inculde a more comprehensive
IAG offering than is presently available if the manufacturing
sector is to retain and recruit efficiently in the coming years.
GRADUATE RETENTION
The manufacturing sector is also further exacerbated
by the problem of graduate retention. A key challenge to the city
and region is in persuading graduates from Birmingham universities
to find employment in the sector locally to boost the economy.
The Regional Skills Partnership (RSP) has found
that over half the region's graduates take a job outside the region
after graduation, which highlights a failure of employers to take
advantage of their skills resource.[28]
In addition, the RSP argues that the skills and potential of many
graduates in the region are not fully utilised with a high proportion
employed in lower skilled "non graduate" jobs.[29]
Graduates in the manufacturing sector continue
to decline for various factors including, perceived job insecurity
and work image of the sector. More must be done on promoting the
sector to Graduates and also in ensuring they have the right skills
to fill the existing skills shortages. There are initiatives in
West Midlands that are going some way to resolving the issue of
graduate retention for the sector such as Graduate Advantage.
Case Study
Graduate Advantage (GA) is an Advantage West
Midlands funded service, which plays a vital role in promoting
graduate career opportunities in the manufacturing sector.
Student Placement Programme (Shell Step Programme)
GA organise student placements run through the
summer vacation period. SME's are entitled to claim 25% discount
of the total placement cost and HR support for paying student
wages.
Graduate Employment & Training Programme
GA also assists the company to develop and advertise
graduate vacancies. GA then supports graduates over the first
six months in their role through a tailored training programme.
We conduct a training needs analysis to assess their developmental
needs and utilize a £750 training allowance to purchase courses,
books or software.
Business Perspective
Through GA, engineering firm, JH Richards &
Co Ltd recruited an engineering undergraduate at the University
of Warwick to tackle a number of key projects for the business
over summer 2006. The company was then able to complete important
operational projects with minimal costs and it also allowed the
undergraduate, to gain valuable work experience in the sector,
developing key skills and understanding of the range of career
opportunities available to him in the sector.
Under the Government's "Five year strategy
for children and learners" in June 2004, new Sector Skills
Councils (SSCs) were established to better involve the voice of
business in the education system. There are five SSCs covering
the manufacturing sector and their main responsibilities are:
— Agreeing a Sector Skills Agreement.
— Developing the Manufacturing specialised
diploma.
— Establishing a Manufacturing Skills
Academy.
SSCs are relatively new organisations and their
contribution to the skills agenda is not yet always fully understood
by employers and stakeholders. When asked how effective they believe
SSCs are at solving skills shortages for the sector 59% of manufacturers
stated that they were ineffective. A further 52% of manufacturers
believed that SSCs were ineffective at offering a voice to business
on skills issues. A worrying 33% of respondents had not even heard
of SSCs, not surprisingly they were all SMEs.
The success of SSCs will be paramount to future
skills attainment of the sector. More work needs to be done on
ensuring smaller companies have a say in the strategic development
of SSCs and their work. The British Chamber of Commerce Network
could be better utilised by Government and SSCs to fulfil this
objective.
CONCLUSIONS AND
RECOMMENDATIONS
The extent to which skills shortages are hindering
the development of the manufacturing industry is clear and alarming.
However, there are key developments around the skills agenda that
can be utilised and developed to rectify the skills shortages
in the sector. This will be made possible through greater collaboration
between the sector, education providers and initiatives. The Government
also has a major role to play both in terms of legislation and
funding existing successful initiatives.
Our main recommendations to Government are to:
— Monitor and support the effective
development of the manufacturing diploma and also examine the
educational needs for manufacturing education at Key Stage 3.
— Analyse the opportunity to incentivise
businesses in workforce development and promote and assist in
the development of level 3-4 management skills in the sector.
— Continue the financial support of
successful initiatives such as, MEIRG, Graduate Advantage and
Create a Future, which offer incentives to business and cut Government
financial costs effectively.
— Reform the current plethora of adult
IAG services in to a radical and coherent agency that offers a
distinct careers advice service for adults.
— Ensure a wide-ranging consultation
process with the sector through the SSCs and fund greater promotion
of SSCs through Business membership organisation such as the British
Chamber of Commerce network.
28 September 2006
18 Birmingham Chamber of Commerce and Business Link
statistics, September 2006. Back
19
DTI definition of SME is "An enterprise with fewer than
250 employees' www.dti.gov.uk Back
20
Regional Skills Partnership Sector Profile 2005: Manufacturing,
20 July 2006, West Midlands Regional Observatory. Back
21
"Making Thins Happen: A Strategy for Manufacturing in
Birmingham" 2006 Birmingham City Council. Back
22
MG Rover Task Force-Final Update Report-"The Work Goes
On"-6 March 2006. Back
23
Career Opportunities in the West Midlands, West Midlands Regional
Observatory, 2006. (Data presented at Government Office West
Midlands, 14-19 Conference). Back
24
Census data 2001, www.statistics.gov.uk. Back
25
Realising the Potential, A review of the future role of further
education colleges, Sir Andrew Foster, November 2005, p 14. Back
26
House of Commons Public Accounts Committee Twenty-first Report:
Skills for Life: Improving adult literacy and numeracy, January
2006, p 14. Back
27
Census data 2001, www.statistics.gov.uk Back
28
Regional Skills Partnership: Regional Skills Assessment 2005,
RSP, December 2005, p 8. Back
29
Regional Skills Partnership: Regional Skills Assessment 2005,
RSP, December 2005, p 8. Back
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