APPENDIX 21
Memorandum submitted by EEF, the Manufacturers'
Organisation
INTRODUCTION
1. EEF is the representative voice of manufacturing,
engineering and technology-based businesses with a membership
of 6,000 companies employing around 800,000 people. Comprising
11 regional EEF Associations, the Engineering Construction Industries
Association (ECIA) and UK Steel, EEF is one of the leading providers
of business services in employment relations and employment law,
health, safety and environment, manufacturing performance, education,
training and skills.
2. We are delighted to be able to contribute
to such a critical inquiry into the future of manufacturing. To
support our policy work, EEF has undertaken a significant amount
of work on which we draw for this submission. This includes the
factors behind differences in productivity with the United States[44]
and continental Europe,[45]
how manufacturers see opportunities and threats in the world economy[46]
and how they are responding to them and the drivers and constraints
experienced by manufacturing in raising levels of skills[47]
and innovation.[48]
HOW MANUFACTURING
IS CHANGING?
3. The start of this decade saw a structural
break in the competitive environment under which manufacturing
operates and the response of the sector to this new challenge.
Manufacturers experienced a combination of three pressures—a
substantial rise in the pound's value against the euro, a significant
downturn in world markets and the rise of a range of low cost
locations including China, India and Central and Eastern Europe.
4. Manufacturers have responded to these
pressures on two fronts—innovation and cost cutting. EEF's
survey evidence shows two-thirds of manufacturers placing an increased
focus on innovation and most of the rest planning to do so or
considering it. Cost cutting has taken a number of forms. Manufacturers
are making greater use of lean manufacturing and other techniques
aimed at cutting waste and improving agility. Support from the
Manufacturing Advisory Service (MAS) has accelerated the take
up of these techniques; as has foreign ownership of UK manufacturing
which spread the use of the technologies down the supply chain.
Manufacturers are also increasingly purchasing from abroad rather
than producing components themselves or buying them from domestic
suppliers. In just four years between 1997 and 2000 imports of
intermediate goods grew by 47%.
5. Companies are also increasingly considering
locating some activities abroad. In most cases, companies are
looking at the prospect of moving some of their production and
final assembly to overseas locations. However, all but a small
minority expect to keep their research and development and marketing
in the UK.
6. These trends mean that the domestic market
for companies in the supply chain to large companies has shrunk
as the major customers have shifted some of their activities and
purchases abroad. These suppliers are therefore increasingly reliant
on exports to win new orders. This is illustrated in Figure 1
which shows export orders outperforming domestic orders since
the start of this decade, a reversal of the position in the second
half of the 1990s. Indeed, domestic orders have been weak throughout
this decade.
Figure 1
MANUFACTURERS RELY ON OVERSEAS SALES
Source: EEF Business Trends Survey.
7. These trends reinforce the importance
of the need for manufacturers to develop export markets. However,
the weakness of domestic orders will mean that the ties that bind
companies to the UK will be weakening for a growing number of
companies. It is therefore vital that the UK business environment
enables companies to develop innovative responses to the competitive
pressures that they face and does not put them at a cost disadvantage.
MARKETING UK PLC
8. All of the above factors make it important
for the UK to provide export support that matches the best of
what is available to our competitors as well as maintaining our
ability to attract foreign direct investment (FDI). While we acknowledge
the important role that FDI can play in raising productivity through
mechanisms such as the transfer of new technology, ideas and management,
we are particularly concerned about the cuts to the funding of
export support and its impact on the ability of UK Trade and Investment
(UKTI) to deliver on its strategy.
9. Governments around the world play an
essential role in supporting exporters, providing support that
the market would not deliver on its own. This includes:
— Helping to fill information gaps
faced by firms entering new and unfamiliar markets. These can
include knowledge of local practices and contacts, difficulties
in estimating the costs and risks in entering new markets and
barriers to entry to overseas markets (both formal such as tariffs
and informal such as closed supply chains).
— Developing company capacity to export.
— Encouraging collaboration between
UK companies, including jointly exploring overseas marketing opportunities.
10. Our evidence suggests that the first
of these is particularly important. We are particularly concerned
by evidence from EEF's surveys and from other sources that UK
companies are failing to take advantage of the opportunities presented
by rapid growth in emerging economies. Our research shows that
most companies see countries such as China and, to a lesser extent,
India as major competitive threats but not as opportunities. Figure
2 shows that only 20% of manufacturers see China as a major export
opportunity, a figure that drops to 8% for India. The Select Committee's
recent investigation of trade with India also pointed to a widespread
lack of awareness amongst UK companies of the opportunities in
India compared with some of our competitors. As a result as much
as 90% of traditional engineering exports are going to markets
that are growing at less than an annual 2%. In contrast, only
1% of UK exports go to China and a further 1% to India. Anecdotal
evidence points to European competitors making faster inroads
than UK companies into the fastest growing markets.
Figure 2
FEW SEE OPPORTUNITIES IN EMERGING WORLD
Source: EEF Where Now for Manufacturing
2005.
11. Therefore, EEF supports the decision
by UKTI to develop a strategy that focuses support on emerging
markets. We also welcome the decision to focus more resources
on firms that are best placed to add value in these markets. The
new strategy helps to reverse some of the mistakes of previous
strategies. For example, as part of its Spending Review settlement,
UKTI was set a Public Sector Agreement (PSA) target of a 30% increase
in the proportion of resources focused on new-to-export firms
by 2007-08. This reflected research findings, showing a link between
exporting and increases in productivity and also links between
exporting and innovation.
12. Leaving aside the issue of the direction
of the linkages between exporting and business performance (which
is likely to go both ways) our main concerns are that the previous
strategy led to an over-concentration of resources on small firms,
who have often had limited potential to make a significant difference
to our overall trading performance and for whom in some cases
exporting was not appropriate. The emphasis on capacity building
undermined the provision of in-market support, at a time when
the overall Budget for export support was being squeezed. Yet
the evaluation of UKTI's service shows that information provision
is the area of market failure where exports support delivers a
significant return.
13. In particular, in-market support helps
more established exporters enter into new markets and expand their
activities. These are the companies that have the experience to
capitalise on the opportunities of emerging markets and where
assistance is most associated with clear market opportunities
and export intentions. Until the development of UKTI's new strategy,
this group has been largely overlooked. Reductions in the provision
of in-market support has reduced the visibility of UK exporters
in overseas markets, something that is particularly problematic
in some emerging Asian markets where face-to-face and personal
contacts are a key way to forming business relationships.
14. The government will also need to take
care with its definition of the companies at which a growing part
of the support will be aimed. This involves a shift away from
concentrating resources on smaller firms, but only if the concept
of innovation-led firms is not applied narrowly. UKTI's strategy
document uses the terms innovation-led and R&D-intensive interchangeably.
Yet recent EEF research demonstrates that innovation goes far
wider than this in most manufacturing, taking in product development,
design and the development of revenue streams from services. In
many cases, being innovative does not equate with being high-tech
or having a large R&D budget.
15. It is also important that the shift
in resources towards emerging markets does not lead to substantial
cutbacks in support in developed markets. While it clearly does
not make sense to have almost as many trade advisers in a nearby
and more straightforward market such as Germany as in India, it
would also be unwise to stop providing support in the UK's largest
markets. This would come on top of the cutbacks that have already
been made as UKTI's budget for export has been reduced. Exports
to the pre-enlargement EU account for 55% of all our exports and
will retain this dominant share for some time.
16. However, we accept that a tight Spending
Review will force some tough choices to be made. We therefore
believe that UKTI will need to look at generating revenue from
some its services, as it does already for some market research
such as the Overseas Market Introduction Service and the Export
Market Research Scheme, with charging reflecting the level of
assistance required. It may be that charges could also vary by
firm size. UKTI should also play a role in signposting companies
towards specific market intelligence available from specialist
providers who will often be better placed than UKTI to provide
more relevant, up-to-date information that is tailored to firms'
specific needs. This suggests that there is scope for joint funding/user
charging-type solutions for this kind of support. It may also
enable UKTI to post staff overseas to free up time from scoping
and generic research and to pursue "warm" contacts and
specific deal opportunities.
17. We also welcome the indication in the
new strategy that UKTI will look to play a stronger coordinating
role. We see the regionalisation of its activities as undermining
its ability to provide high quality export support and to present
a clear message to potential investors in the UK. For example,
regionally-based overseas missions are now responsible for delivering
the Support for Exhibitions and Seminars Abroad (SESA) scheme
(now called Trade Access Programme). This has led to criticisms
of a confused international marketing message for the UK and difficulties
for trade associations in trying to coordinate their work with
UKTI. EEF has also picked up comments from member companies that
significant players in their industries have been excluded from
strategically important overseas missions and events because of
being located outside the geographical area of the RDA organising
them.
18. UKTI therefore needs to play a stronger
role in coordinating the currently fragmented overseas market
initiatives to support exporters and to attract FDI. In turn the
regional development agencies (RDAs) should refocus on identifying
firms for export capacity-building assistance, as the evidence
shows that companies located close to other companies that are
already exporting in a similar sector are more likely to take
up exporting. They should also focus on publicising the range
of UKTI services available and getting companies "into the
system".
19. UKTI's new strategy also indicates that
government ministers will play a more visible role, promoting
UK business abroad as well as lending support for companies seeking
to win major orders in industries such as defence. This is a welcome
move given that the firms consulted by EEF felt that ministers
from competitor countries often had a much higher profile in doing
this, particularly in emerging markets.
20. EEF has been critical of the decision
to shift the balance of funding towards foreign direct investment
(FDI) at a time when the overall UKTI budget has been squeezed.
This will mean that between 2005-06 and 2007-08 spending on programmes
(ie excluding administrative overheads) will fall from £73
million to £51 million for export support. Given that the
evaluation evidence suggests that spending on export support provides
a greater return than does FDI, we believe that this decision
should be reconsidered in the current spending review. However,
we note that these activities will tend to be co-located in key
overseas markets as part of the new strategy. This has the potential
to improve the effectiveness of both activities and is therefore
a welcome move. A more targeted, professional and better coordinated
approach to FDI will also bring clear benefits and help to attract
investment that will drive up business performance.
21. It is also appropriate to target R&D
intensive activities that will provide higher value jobs and that
are more likely to become firmly entrenched in the UK, than previous
assembly plant investment, through developing links with universities
and other scientific institutions. However, it is important that,
while targeting R&D activities, those promoting FDI do not
unwittingly send out a message to potential investors that the
UK is not interested in manufacturing. A number of foreign-owned
companies have reported this fact. This can make it difficult
for these companies to persuade parent companies to sanction investment
in the UK.
PUBLIC PROCUREMENT
22. The public sector spends close to an
annual £125 billion procuring goods and services from the
private sector. It is vital that such a large sum of taxpayers'
money is spent wisely and the concept of value for money—rather
than any protectionist instincts—should be the key factor
when awarding contracts. However, the public sector does need
to take a wider perspective than this in making decisions on procurement.
Indeed, its own review conducted by the Office of Government Commerce
(OGC) and headed by Sir Christopher Kelly concluded that government
should take a more strategic role in increasing competition and
building long-term capacity. At the end of 2003 it published an
action plan to deliver on this commitment. The DTI's Innovation
Review from the same year also demonstrated that the public sector
should do much more, through both the design of tendering process
and by making it easier for smaller firms to tender for contracts
in order to stimulate innovation.
23. Despite the positive reception received
by the recommendations of the two reports and the government's
commitment to deliver on them, delivery on the ground has been
disappointing. For example, EEF's innovation survey of 500 manufacturers
showed that over twice as many companies viewed government procurement
practices as a negative than those rating them positively. This
contrasted with the two-fifths of firms that identified product
standards (a combination of mandatory governmental requirements
and voluntary industry standards) as a positive impact on the
success of their innovation. In addition face-to-face interviews
with manufacturers carried out by EEF illustrated examples of
firms frustrated by bureaucratic and overly conservative public
procurement. Companies pointed to examples where what they were
able to offer was well ahead of what was requested by the procurer
and the failure of the tendering process to give greater weight
to products that met higher environmental standards such as greater
energy efficiency.
24. Our research also showed that companies
that had accessed public sector contracts were significantly more
likely to be planning to increase spending on innovation than
those that had not. In this respect, the recent announcement of
measures to help smaller companies gain greater access to publicly
funded R&D contracts (with departments now required to purchase
at least 2.5% of their R&D budgets from companies with fewer
than 250 employees) is helpful. However, these initiatives have
been tried before and yielded limited results compared with what
has been achieved in the United States. The government must ensure
that this initiative is fully supported in order to avoid past
mistakes.
25. We need to see a step change in public
procurement if it is to support increased levels of innovation
and improved performance by UK manufacturing. Amongst the steps,
the government needs to take are:
— Increased emphasis on developing
the skills of procurers to achieve the culture in procurement
required.
— An enhanced role for the Technology
Strategy Board in coordinating the government's research priorities
for investment in future technology and a greater profile in communicating
this to the wider business community. Improved business awareness
and understand of the opportunities should help more companies
to get involved in bidding for public sector contracts and to
prepare better and more innovative bids.
— Earlier dialogue between clients
and potential suppliers including more work up-front on specifications
before tender.
— A more predictable order flow, avoiding
the feast and famine approach that has weakened UK capacity in
a number of supply industries. A classic example of this is the
almost non-existent domestic railway equipment industry.
— Basing procurement decisions on value
for money over the whole life of the product, instead of lowest
cost at the time of purchase.
SKILL SHORTAGES
26. The changes in manufacturing that we
discussed in the second section of this submission are making
increasing demands on the skills required by employers. These
trends are increasing the premium placed on adaptability to acquire
new skills quickly and to move from declining sectors of manufacturing.
Manufacturers require the skills that enable them to capitalise
on new technologies, increase innovation activity and get a foothold
in new, rapidly expanding export markets. Innovation and the desire
to move away from mass production and towards niche markets is
spurring the need for new and high level technical and practical
skills. Off-shoring, outsourcing and working in a growing range
of markets are increasing the complexity of managing manufacturing
companies. Reflecting this, EEF's survey of 500 members revealed
a demand for a wide range of skills, with around two-thirds of
employers identifying a growing need for three or more of the
following skills—management, problem solving, team working
and commercial awareness (see Figure 3).
Figure 3
SKILL NEEDS IDENTIFIED
Source: EEF/NOP World Skills Survey 2005.
27. To meet these needs, manufacturers are
increasing their investment in skills and training. EEF's 2005
skills survey showed a balance of over 40% of firms increasing
spending on training in the twelve months prior to our survey
and a balance of 45% intending to raise it further in the subsequent
year (see Figure 4). In addition, the National Employer Skills
Survey 2005 calculated that employers spend over £33 billon
on training annually, including trainees' wages, fees to providers
and company training centres. Eurostat data also show that UK
employees are among the most trained in Europe. Almost 30% of
the population aged between 25 and 64 years had received some
form of education or training in the four weeks prior to the survey
last year. This proportion was almost three times higher than
the EU-25 average and significantly more than in France or Germany.
Figure 4
FIRMS INCREASE INVESTMENT IN SKILLS
Source: EEF/NOP World Skills Survey 2005.
28. There are some signs that this investment
of time and money is delivering results. For example, Figure 5
shows that the proportion of the workforce with qualifications
below NVQ level 2 (equivalent to five GCSE passes) fell from 43%
in 1994 to 33% in 2004. Despite this, the 2005 National Employers
Skills Survey found that over a quarter of establishments with
more than five employees reported skills gaps in the workforce.
Furthermore, the improvement in skill levels has been most apparent
at the top end, with the proportion of the workforce educated
to degree rising by seven percentage points over the same period.
There has been relatively little movement at the intermediate
level—the levels that are regarded as most in demand by
manufacturers.
Figure 5
LOW SKILLED WORKERS IN DECLINE
Source: Leitch Review interim report.
29. The downward trend in the proportion
of low skilled employees and those with skill gaps is good news,
but this is not the whole story. Even with the improvement made
over the past decade a third of the labour force are qualified
to a standard below NVQ level 2 (equivalent to five GCSE passes).
30. Despite the increased employer investment
in training and a decline in the numbers of low skilled workers,
firms in manufacturing face a number of problems:
— the pool of potential recruits from
school and higher education in science, technology, engineering
and mathematics (STEM) subjects is either declining or not increasing
sufficiently fast to meet their needs;
— employers struggle to find the required
information on what training is suitable for their needs and to
get providers to respond to them;
— related to this, the overall skills
system is complex and bureaucratic, failing to fulfil its duty
of creating a demand-led system and leaving employers feeling
disengaged; and
— the effectiveness of employer spending
on training is undermined by the failure of a significant number
of them to take a strategic approach that links training to their
business plan.
31. We look at each of these issues in turn.
Talent pool for STEM subjects
32. Manufacturers require employees with
a range of different skill needs and from a variety of educational
backgrounds. In this sense, their needs are similar to companies
across the rest of the economy, with skills in the areas of management,
finance and administration, clerical and secretarial, sales and
marketing and so on playing an important role. However, one category
of workers is absolutely critical for firms looking to make a
continued improvement in the quality of their products and the
efficiency of their processes—those with good qualifications
in STEM subjects. Unfortunately, recent trends suggest that the
education system is not delivering these skills in sufficient
enough numbers. While the number of A-level exam entries has increased
by 8% between 1984 and 2005, it has fallen by 56% for physics
and by 31% for chemistry. In just the last 10 years, the number
of A-level entries for Maths has fallen by 15%.
33. Similarly, large rises in the numbers
of student awarded biology and computer science degrees has hidden
a decline in the numbers for physics and chemistry. While first
degrees in science subjects have risen by 66% since 1994, the
numbers for physical sciences (physics and chemistry) show a fall
of 7% and for engineering and technology of 11%. However, there
is some encouragement from a rise in the numbers taking mathematics.
34. Clearly, one aspect of globalisation
is that employers are increasingly able to recruit from a global
labour market for talent. This has a number of positive and negative
dimensions. For example, the numbers of undergraduates taking
science subjects is accounted for by overseas students. Some of
these may remain in the UK or retain links with this country when
they return. Overall, however, the headline science statistics
from universities paint a more optimistic picture than is the
reality. UK employers are also filling some of these gaps by recruiting
workers with STEM qualifications from abroad and many report positive
experiences. However, this may prove to be little more than a
quick fix, particularly if they return home after a few years.
Given our earlier comments about the loosening ties of domestic
manufacturers with the UK, the need to look abroad for skills
may prove to be another factor pushing companies to look at locating
all or some of their activities abroad.
35. These trends point to an urgent need
to raise the number of teachers qualified to teach STEM subjects,
improve the quality of careers guidance and to support the introduction
of Specialised Diplomas with the funding required in the forthcoming
spending review to ensure their success.
Information and employer responsiveness
36. Firms face a range of barriers to providing
more and, importantly, better training for staff, as illustrated
in Figure 6. Budget constraints, mentioned here by some 60% of
firms, are often cited by firms engaging with a range of investment
activities—skills and training included. Over time, we believe
the decision to place an increasing proportion of funds available
through Train to Gain in the hands of purchasers (employers) rather
than providers such as further education (FE) colleges will address
these constraints, although it is important to keep the issue
of tax incentives under consideration.
37. However, in this submission, we focus
on the perceived lack of information and appropriate provision.
Our 2005 Skills survey highlighted difficulties for companies
in sourcing the right training—either courses are not available
locally (or at all), or there is a lack of appropriate and easy
to navigate information sources for employers. Our discussions
with a number of employers, both large and small, indicate a lack
of straightforward routes to sourcing information on where to
go to get good training. For example, an employer could try contacting
the local Business Link service. Business Link's website suggests
employers carry out a training needs analysis and recommends contacting
Learndirect, the Learning and Skills Council, trade associations,
employers' bodies or the relevant Sector Skills Council for guidance
on provision. This policy of "no wrong door" for advice
and guidance can have advantages and disadvantages. This structure
provides a range of options and pathways for those seeking assistance
with training activities. However, this system can only work if
each pathway delivers the same, high quality outcome for employers.
Employers risk being passed from pillar to post to find a solution
to a skill or training need. If the structure is too complex or
time consuming, employers will become disengaged.
38. Our survey also showed a perceived lack
of appropriate provision—either the sort of training they
sought was not available in their locality or it was not suitably
tailored to their industry. While this indeed may be the case
in some regions and industries, we would also question whether
this is again a reflection of the quality and availability of
information.
Figure 6
FUNDING, TIME AND INFORMATION CONSTRAIN INVESTMENT
Source: EEF/NOP World Skills Survey 2005.
A complex skills system
39. A large part of the problems outlined
under the previous heading reflect the complexity of the skills
system. Despite the best intentions, the raft of initiatives in
recent years has created a bureaucratic structure which employers
struggle to navigate and with which the majority of them have
become disengaged. The government has recently introduced a number
of useful measures as it seeks to create a demand-led system.
These include implementing the recommendations of the Foster Review
to make FE colleges more responsive to customers, putting an increasing
proportion of public funding for training in the hands of customers
through Train to Gain, developing a system of brokerage to support
this and signalling the return of Individual Learning Accounts.
40. However, these initiatives risk being
swamped unless the government reforms the system as a whole. One
of the fundamental problems with the post-16 education and skills
environment is the very substantial separation between policy
makers (government) and end-users (employers and individuals).
At the top of the tree there are government departments, such
as DfES, DTI and HM Treasury, whose main function is to determine
national priorities, targets and budgets. The national Learning
and Skills Council (LSC), as controller of post-16 learning budgets
also plays a leading role in the government's skills agenda. Moving
through the system, there are the sector and regional bodies,
the various regional and local divisions of the LSC, learning
partnerships and training providers.
41. Within this hierarchical structure there
are a number of barriers to transforming the current fragmented
infrastructure into a market-led system:
— Skills priorities outlined in regional
strategies are driven more by national targets than employer needs.
This also raises questions as to whether local funding bodies
have sufficient discretion over expenditure outside of these national
targets.
— Marrying a regional-led and sector-led
approach inevitably creates a complex system. For example, it
creates the need to develop relationships between 25 Sector Skills
Council and nine Regional Skills Partnerships (RSP).
— Sector Skills Councils and RSPs have
duplicated each others efforts and have tended to come up with
highly general recommendations such as the need to improve skills
related to management, business improvement and IT.
— An indicator of the level of employer
engagement is the small number of employers represented on the
RSPs—bodies which were intended to be led by them. In the
West Midlands just three of the 17 board members are from organisations
representing employers or business, the East Midlands has three
out of 30 and the North East four out of 15.
— It is also far from clear whether
this excessively bureaucratic regional structure can deliver a
clear and accurate picture of regional skills priorities. In addition
there is an over-reliance on labour market forecasting to "plan"
provision.
— The fundamental problem for employers
of accessing and funding appropriate training to meet business
strategies is not being addressed anywhere in the current structure.
42. The government should make a radical
change from the current system and adopt a sector-driven approach.
Marrying supply and demand together at the sector level makes
much more sense for a number of reasons. Sectors reflect distinctly
different business activities, many of which have existed for
many years, albeit subject to constant change. In contrast, regions
are administrative entities, created by government, often bringing
together many areas that have little in common with each other.
Sectors can also rely on a range of employers' organisations,
trade associations and, to varying degrees, Sector Skills Councils
to articulate their needs. Regions are unable to call on anything
comparable to this, as illustrated by the failure of RSPs.
43. Arguably the most important reason is
that skill needs and labour market conditions will vary much more
between sectors than between regions. For example, although they
will share some common issues such as the growing importance of
management skills, employment trends and skill needs are likely
to vary considerably between industries such as aerospace manufacture,
hospitality and financial services. In contrast, there are limited
differences in both qualification levels and occupational composition
between regional labour markets. This is particularly true for
intermediate level skills (NVQ Levels 2 and 3); excluding London
there is a deviation of only one percentage point in the proportion
of the workforce with these skills across the regions from the
English average.
44. Moving to a sector-led approach will
change the role played by the different organisations and is also
likely to remove the need for some of them. However, any such
reorganisation should also achieve significant simplification
of the current system. This should be guided by the need to:
— clarify the roles and responsibilities
of the main players;
— reduce the amount of overlap and
duplication of functions; and
— promote greater transparency in decision
making.
45. To deliver an effective sector-led approach,
we suggest the following changes:
— The Sector Skills Development Agency
(SSDA) and the Learning and Skills Council should be combined
into one body—a "National Council for Skills"—that
would speak with one influential voice on the development of post-16
learning.
— The number of Sector Skills Councils
should be reduced to allow them to take real responsibility for
sector-specific skills issues.
— The level of business representation
on RSPs should be increased considerably and they should become
part of an enhanced regional board of the National Council for
Skills (formerly regional LSCs).
— The remit of Skills Academies should
not include tasks or functions that are carried out elsewhere.
Their focus should be on accrediting high quality training provision
and raising the standards of providers.
46. Figure 7 illustrates how this simplified
infrastructure might operate in practice. The policy development
process in this model should clarify the roles of each stakeholder
and how they would be expected to influence at the national and
sub-national level. Furthermore, under this proposal much of the
bureaucracy that distances learners and providers from decision
makers is swept away. This should ultimately lead to a more transparent
relationship between central government departments and a "National
Council for Skills", which will combine the functions of
the SSDA and LSC. The regional funding bodies in the chart combine
the work of the RSPs and the regional LSCs.
47. While we envisage greater business involvement
across the learning and skills network through increased representation
on regional and national boards, the main point of engagement
should be through Sector Skills Councils. Importantly, this should
also result in an improvement in the quality of information flowing
between stakeholders. The analysis of skills needs carried out
by SSCs should be underpinned by more comprehensive dialogue with
employers.
Figure 7
A STREAMLINED SKILLS INFRASTRUCTURE
Effectiveness of training expenditure
48. EEF's research also shows that a minority
of companies take a strategic approach to training. Less than
a third of companies in our survey (31%) said that the business
plan had a significant impact on the training expenditure. About
a fifth of companies said that the business plan had no impact
at all. EEF's research also showed that companies that adopted
a more strategic approach to training tended to get greater benefits.
49. EEF looked at companies that had been
awarded or were working towards the Investors in People (IiP)
standard—a tool that requires companies to develop strategies
for training linked to the improved performance of the business,
implement them, monitor their success and communicate them to
their staff. EEF's survey shows that firms with the IiP standard
are far more likely to report that the business plan had a significant
impact on training (54%) than those without it and not working
towards it (28%). In addition nine in 10 firms with IiP reported
that training had had a positive impact on productivity, compared
with two-thirds of firms without it.
50. IiP may not be the only tool that brings
these benefits and there are some perceptions amongst business
that it is a bureaucratic process, though this may be because
they are not aware of attempts to simplify it for smaller firms.
We recommend a renewed effort to promote to business the benefits
of participation in IiP. At the same time, the Manufacturing Advisory
Service should undertake an evaluation of how it can help firms
to take a more strategic approach to training.
51. Alongside the steps outlined above to
simplify the training system, we see these measures to raise the
quality and effectiveness of training as offering the best route
to improving workforce skills. While it is possible that some
form of compulsion might increase the level of training expenditure,
it is unlikely to raise its effectiveness and it is more than
likely to such a prescriptive approach would reduce it. The government
should therefore focus on improving the workings of the skills
system and helping firms to improve the effectiveness of their
training expenditure. Decisions on introducing a training levy
or any other form of compulsion should be left to individual Sector
Skills Councils.
CONCLUSIONS
52. It is clear that the future for manufacturing
in the UK is one of many challenges. But EEF remains convinced
that these challenges are not insurmountable, but can—with
the right support from policy makers—be met head on to ensure
that the UK continues to support a flourishing and wealth-creating
manufacturing sector. By focusing on trade support, skills and
public procurement, we are confident that the government can play
a critical role in helping to promote the competitiveness of a
sector that is exposed to fierce competition, on a global level,
on a daily basis.
28 September 2006
44 Catching up with Uncle Sam-EEF Final Report on
US and UK Manufacturing Productivity, EEF. Back
45
Catching up with the Continent-Final Report on EU and UK Manufacturing
Productivity, EEF. Back
46
Where now for manufacturing? EEF. Back
47
Learning to Change-Why the UK Skills System Must do Better, EEF. Back
48
New Light on Innovation-How UK Manufacturing is Meeting the Challenge,
EEF. Back
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