APPENDIX 27
Memorandum submitted jointly by the Institution
of Engineering and Technology and the Institution of Mechanical
Engineers
INTRODUCTION
The Institution of Mechanical Engineers (IMechE)
is a professional body representing around 75,000 professional
engineers, working in all sectors of the manufacturing industry.
Most notably through our Manufacturing Industries Division (MID)
and our globally-recognised Manufacturing Excellence Awards, we
have been contributing to the development, talent and wealth of
UK manufacturing for many years, and have a detailed understanding
of what makes a successful manufacturing company.
The Institution of Engineering and Technology
(IET) was formed by the Institution of Electrical Engineers (IEE)
and the Institution of Incorporated Engineers (IIE) in March 2006.
The IET now has more than 150,000 members worldwide from a wide
range of engineering disciplines, including active networks of
manufacturing engineers and managers.
This evidence has been developed by the members
of the two institutions with input from other partners and stakeholders.
We welcome the opportunity to assist the work of the Committee
by responding to this inquiry.
MARKETING UK PLC
Manufacturing represents about 18% of UK GDP,
and accounts for around 62% of export volumes. We see the UK manufacturing
sector, contrary to popular perception, as strong and vibrant.
While overall employment levels in the sector have fallen markedly
over the last few decades, productivity levels have been rising
steadily, while overall output has remained fairly stable for
the last 5-10 years.
Better equipment, processes and trained people
have facilitated a move away from low value-adding, labour intensive
industries (which have largely moved to cheaper labour markets
overseas) to high value, high technology, highly integrated products,
using sophisticated processes and supply chains. The UK has many
world-leading firms in such fields (eg pharmaceuticals, aerospace,
automotive, electronics)—what is required is for government
to help maintain and grow investment in these sectors, in skills,
equipment, processes and innovation. Even when production moves
overseas, design, development, marketing and other activities
often remain in the UK, contributing to UK wealth. UK manufacturing
expertise is strongly sought after, eg thousands of overseas students
study at university centres of excellence like Cranfield, Warwick,
Cardiff and Cambridge.
We believe the main role for government and
the legislature regarding helping to attract firms to invest in
the UK, is in ensuring a fair and level playing field, whereby
investment in the UK is not perceived to be more risky and more
costly than investing in similarly developed countries. We need
to ensure our regulatory and fiscal environments are every bit
as attractive to investors as those in other countries, especially
in other parts of the EU. There is a common perception that the
UK is much more rigorous in its interpretation and application
of EU laws than other Member States, and therefore represents
a greater burden to potential investors.
Lack of government consistency and leadership
is another real problem for UK plc. Investors need long term certainty,
yet government ministers, policies and support mechanisms all
change far too frequently. It is only through this leadership
and consistency that the UK can hope to become world leaders in
particular technologies, eg the innovative, sustainable and wealth
creating solutions to the challenges of climate change. We must
develop the consistent, long term incentives and support mechanisms
for pioneer companies in fields like wave and tidal energy (and
several others), or watch the expertise and commercial exploitation
of these technologies go the way of so many others before them—overseas.
Manufacturing will increasingly need to be seen
in the wider context of a process which runs from product creation
through to decommissioning or recycling, rather than just the
production processes themselves.
Whilst no one can doubt the value of inward
investment in creating jobs in the UK, there is a view that too
much effort is being concentrated on attracting such investment
at the expense of reducing support for UK exporters in key markets.
Accepting that there are EU regulations that limit the level of
support that can be offered to exporters, there is some concern
that UKTI has backed away from many of the initiatives that used
to provide valuable support for UK exporters. For example we believe
that UKTI used to offer two packages to first time exporters (Export
USA and Export Canada) that offered invaluable hands-on guidance
to companies including mentoring with a Trade Officer from one
of the overseas posts. Similarly, UKTI used to offer Trade Show
support to UK companies wishing to exhibit/visit nominated Trade
Shows around the world. This funding is no longer available from
Central Government and the only way that UK companies can get
support, if at all, is via their own Regional Development Agency.
Overseas support has also diminished with the merging of the Overseas
Market Intelligence Service (OMIS) with the Inward Investment
Officers in the UK Consulates, which has resulted in no one having
dedicated responsibility to offer trade support to UK companies.
PUBLIC PROCUREMENT
Manufacturing relies upon the creation and development
of good ideas. This includes not only innovation in products and
technologies, but also the creation of novel manufacturing methods
and processes to help to gain advantage within competitive markets.
We believe that it is important that public procurement focuses
on encouraging this innovation rather than simply "Buying
British" or buying cheapest. We see tremendous scope for
the Government to support investment and innovation in UK industry
through its own procurement policies and practices.
Procurement programmes, co-ordinated across
national, regional and local government, can provide a strong
incentive for investors to develop innovative new products and
commercially viable production facilities. The challenges of climate
change, it is becoming increasingly clear, require the much faster
development and commercialisation of sustainable technologies
than would be possible without such procurement programmes.
Well designed procurement programmes can:
— increase skills levels; and
— improve customer/supplier relationships.
Opportunities exist in many fields, including
transport (eg bio-fuels, low carbon vehicles, road pricing, light
rail), buildings (eg microgeneration, glazing, lighting, smart
metering, CHP) and energy supply (eg energy from waste, distributed
generation, renewables).
There are many examples of the successful development
of new technologies in other countries that the UK could usefully
emulate, such as wind power in Denmark, solar power in Germany
and the Dong Tan "sustainable city" project in China.
There are isolated good examples in the UK,
too (Woking is one). Central Government needs to work more closely
with the RDAs and others to spread and co-ordinate best practice
at a local level, encourage more widespread use of appropriate
quality standards and the use of other contractual arrangements
that foster innovation and skills development.
SKILLS
The areas of skills shortage in UK manufacturing
industry have been well documented over recent years (eg Labour
Market Surveys) and in general these are mirrored in other developed
economies. The problem is not simply a case of not enough people
possessing the right skills for manufacturing industry. There
is also a major problem with attracting young people into a career
in engineering in general and to manufacturing in particular (ref
"Manufacturing our Future", The Manufacturing Foundation
2003).
The Government, through the Sector Skill Councils,
has concentrated on raising skills and education levels across
the board and particularly at the shop floor and technician levels.
We agree that this is an important activity; however there is
evidence to suggest that the quality of higher level management
skills has a big impact on company productivity and profitability.
A recent report from the LSE and McKinsey (Management Practices
Across Firms and Nations, June 2005) highlights the management
differences in medium sized UK, US, French and German manufacturing
companies. Their study suggests that there is a direct link between
good management practice and better company performance, with
US companies scoring higher, on average, in the application of
good management techniques than did UK companies. Anecdotal evidence
suggests that many UK manufacturing companies find it hard to
recruit managers with the necessary leadership skills to maintain
and develop a modern manufacturing enterprise. The IET, working
with industry and academia, is currently developing a Manufacturing
Leadership Academy in an effort to improve this situation. The
advantages of achieving a well educated and trained workforce
will be lost if their leaders themselves lack the necessary skills.
The issue of attracting people into manufacturing
rests to large extent with the employers offering competitive
careers. For example, currently many graduates of manufacturing
business schools are attracted away from the industry by lucrative
offers in the financial sector. The Government, through the work
of the Manufacturing Forum, is taking some actions to try to improve
the image of manufacturing; however a long term effort is needed
to avoid the public's self fulfilling prophesy of a UK manufacturing
sector in terminal decline.
UK manufacturing offers well-paid careers to
engineers and other science based graduates, as witnessed by recent
IMechE salary surveys, yet too few young people are undertaking
engineering and science courses at university to provide the highly-educated
resources which manufacturing needs. The IMechE's own Formula
Student competition (also supported by IET) makes a valuable contribution,
not just in attracting more young people onto engineering degree
courses, but also in equipping engineering graduates with the
business, team working, project management, sales and marketing
skills manufacturers need. The Government should offer greater
support to such programmes and work with the Institutions, Universities,
SEMTA, SETNET and others to develop more of them. Underpinning
this is the need for an education system which fosters science,
technology, engineering and mathematics (STEM) as key tools to
create added value, solve problems and make a real difference
to society and the environment. This would help to promote a greater
public understanding of the role of manufacturing industry in
seeing these tools through to successful application, but is crucially
reliant on much closer collaboration between DfES and DTI. The
current perception is that DfES is more interested in any qualification
than the particular (STEM) skills that UK plc (as represented
in Government by DTI) most needs.
October 2006
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