Evidence submitted by the Scottish Enterprise Network
EXECUTIVE SUMMARY
The defence-related industry in Scotland contributes significantly to the economy. Scottish Enterprise is focussed on ensuring that the industry continues to develop and grow and that the benefits are extended into the wider supply chain.
The future business of the industry is reliant on a number of inter-related factors. Scotland needs to ensure the maintenance and development of a highly skilled and trained workforce capable of meeting the needs of the UK MoD as customer for the design and construction of complex military vessels, systems and equipment. The Industry in Scotland is represented by the key employers of BAE Systems Surface Fleet Solutions, Babcock Marine, Selex Sensors and Aircraft Systems, Raytheon, BAE Systems Insyte and Thales Defence Optronics. The two primary Scottish strengths for defence are in shipbuilding and ship repair and defence electronics—Scotland's strengths in defence electronics have long been recognised and Scotland has significant strengths in its academic base including a world leading laser centre, a world centre for photonics expertise and opto-electronics capabilty.
The Future Aircraft Carrier (CVF) programme is recognised as a major opportunity and Scottish Enterprise has developed a highly coordinated and integrated approach to workforce development and training, the Scottish Marine Technologies Training Project (SMTTP). This brings together the companies involved with all the relevant public agencies and training providers to ensure a consistent and adaptable approach to recruitment, training and skills development for the industry. SMTTP also recognises that the defence shipbuilding industry also represents an opportunity to attract people into the wider engineering sector and will provide for the re-training and re-skilling of the workforce as necessary to serve the long term needs of not only the marine sector, but other engineering sectors as well.
However, there are a number of issues facing the long-term viability of the industry in Scotland and its ability to capitalise on the opportunities presented by the defence sector.
For shipbuilding and ship repair, Scottish Enterprise is concerned that a failure to address the need for a balanced and consistent pattern of demand for defence vessels will not only undermine the strategic UK and Scottish shipbuilding capability, but will deter people from entering the industry. A coordinated approach to defence contracting will not only secure a long term future for the Scottish and UK industry, but will also help to secure Britain's place as a successful exporter of military ships.
The defence electronics industry in Scotland is also starting to report a shortage of graduates in the necessary engineering degree courses as reported throughout Western Europe and USA, in particular systems engineering, design engineering and electronic engineering. This is occurring through the lack of interest in engineering as a career option. SE has led initiatives to increase the interest in engineering for school-leavers and has worked with other agencies in the UK to address this. However, further support is required to ensure that the career opportunities available in engineering are encouraged and promoted.
INTRODUCTION
1. Scottish Enterprise (SE) is funded by the Scottish Government to provide enterprise, investment and innovation support to an area covering 93% of the population, reaching from Grampian to the Borders.
2. Working in partnership with Scottish business and the public sector, it aims to support the sustainable growth of the Scottish economy, contributing to the delivery of the objectives of the recently launched Government Economic Strategy.
3. In recent years it has been changing its organisation and practices to make sure it delivers the greatest possible economic impact for Scotland. It has been identifying the opportunities and working to overcome the barriers to growth in Scotland's priority industries. More recently it has been adapting its economic development approach and working increasingly with Scotland's research base to respond to the specific challenges and opportunities available to Scotland in the global economy.
4. Following the Scottish Government review of the SE network announced in September 2007, SE[3] has been given a very clear focus to help support business growth and to build a better business environment. It aims to implement its new organisational structure from 1 April 2008.
5. Aerospace & Defence and Shipbuilding/Marine are identified by Scottish Enterprise as being part of a group of industries which are important to the Scottish economy. Whilst companies are involved in a range of manufacturing and research and development activity in these sectors in both the civil and defence sectors, in 2005 defence accounted for 54% of total sales for these sectors in Scotland, equivalent to £1.03 Billion (SBAC Scotland Annual Survey for 2005).
6. Of the 16,000 employees in aerospace, defence and marine in Scotland, 47% are in naval, 22% in defence and 31% in aerospace, with an estimated further 17,000 staff employed indirectly in the supply chain. Defence-related business is therefore a significant contributor to Scotland's economy (SBAC Scotland Annual Survey for 2005).
7. SE has strategies specifically to support the Aerospace & Defence and the Shipbuilding/Marine sectors. In the case of the latter this is focused in particular on skills development. The terms of the inquiry brief focuses more heavily on marine-related employment and skills aspects. It will probably be helpful therefore if the specifics of employment and skills in the Defence Marine sector are addressed in more detail.
DEFENCE SHIPBUILDING/SHIP REPAIR AND DESIGN
8. Shipbuilding/ship-repair has emerged as a high technology engineering business contributing considerably to the economy. In 2005, the last year for which official records are available, ship and boat building/repair in Scotland employed 5,300 people and contributed £180 million Gross Value Add (21% and 24% of the UK industry respectively). (Source: Annual Business Inquiry (ABI), Office for National Statistics). Since 2005 there has been a considerable upswing in Scottish employment in defence shipbuilding and a significant reduction in capacity elsewhere in the UK. Scottish capacity is geared heavily towards defence.
9. BAE Systems Surface Fleet Solutions operates facilities at Govan and Scotstoun which continue to demonstrate capability in all aspects of complex warship building. The company is currently producing six Type 45 destroyers for the Royal Navy, with the possibility of a further two vessels. It also has a successful record in building export warships. It employs over 4000 people on the Clyde.
10. Babcock Marine operates the former Royal Dockyard at Rosyth. In addition to commercial work for the wider marine and other sectors, it is responsible for a successful programme of ship refit and repair for the MoD, being designated as a strategic maintenance facility. Babcock Marine's Rosyth facility currently employs around 1,250 people. Babcock is also responsible for the operation of the Faslane naval base. Babcock has around 1,400 staff at Faslane. Overall the site employs around 3500 staff, excluding naval personnel.
11. Both companies are members of the Aircraft Carrier Alliance, established to undertake the construction of two Future Aircraft Carriers (CVF). The CVF programme is expected to involve construction of major sections of the vessels in the Scottish yards, with final integration of the vessels taking place at Rosyth.
12. It is expected that other companies in Scotland will be actively involved in the CVF programme. It is known that civil yards such as Burntisland Fabrications and Ferguson Group have been actively benchmarked. Other specialist equipment suppliers located in Scotland are expected to be involved in CVF, including Rolls-Royce Marine and Converteam in Fife and Glasgow respectively.
13. The design offices at both BAE Systems and Babcock are involved in the design of the vessels. Indeed it is understood that the majority of the design work will take place in Scotland. SE and the Scottish Government have been actively supporting the training and equipment needs of these design offices in anticipation not only of the CVF work, but also the longer term potential to win military and civil design work.
14. Discussions with the companies suggest that the supply of trained UK marine designers is starting to become more constrained. However, Scotland remains a key location in European and world terms for marine design capacity. Undoubtedly however this is becoming an issue and must be addressed by active encouragement of school leavers to study naval architecture or marine engineering.
SCOTTISH SKILLS BASE
15. The engineering sector generally is well supported by SE through the Modern Apprenticeships programme, with some 1,102 new engineering apprentice starts across all sectors in the current financial year to date since April 2007. (Source: Scottish Enterprise Skills & Learning CTS Database, 8 January 2008).
16. The labour demands associated with CVF have been long anticipated and detailed plans are in place to address the skills needs of the project. Clearly the steady build-up of the BAE Systems' Clyde yards, as a result of a comparatively healthy order book, has enabled a gradual approach to workforce recruitment and development. This includes a successful apprenticeship programme, with some 529 apprentice starts since 2002-03. The company is Scotland's largest private sector employer of Modern Apprentices. Additionally the company has been actively recruiting trained personnel.
17. The inconsistent flow of MoD refit contacts for Babcock at Rosyth did create downward pressure on staffing levels in recent years. Scottish Enterprise has, and continues however to support re-training and up-skilling of production workers to create an expanded design workforce which, with other measures, served to avert a further planned round of redundancies in 2006. The workforce is now growing, with the recruitment of some 50 apprentices in September 2007. CVF is expected to generate significant pressure for recruitment of both trained personnel and apprentices.
18. A detailed breakdown of skills needs for the CVF project is expected in the near future but Scottish Enterprise is basing its plans for support on an overall indicative figure of around 1,400 additional workers to meet the peak demand. It is likely that a degree of workforce sharing will also take place between the yards to address the specific needs of the multi-site CVF project.
19. SE has been actively involved in the development of the Scottish Marine Technologies Training Project (SMTTP). SMTTP is designed to coordinate the activities of the companies, further education colleges and various agencies in the recruitment, training and up-skilling the workforce needed to serve the anticipated needs of the shipbuilding industry. The potential also exists for the involvement of private training providers. The list of organisations currently involved in SMTTP is at Appendix A.
20. The project aims to create a "skills pipeline", designed to address every aspect of the engagement, recruitment and training process. It will engage with potential youth and adult employees, will play a role in unlocking the latent potential of those not currently in employment, education or training, and will address the up-skilling of the existing workforce in the industry. SE is also exploring the potential to introduce accelerated adult apprenticeships, with the best practice developed in this sector being shared with other industry sectors.
21. SMTTP is also designed to address the re-training and re-skilling of the workforce at the end of the CVF project peak, securing for Scotland a long term engineering workforce capable of meeting the needs of diverse industries. This includes the maintenance and continued up-skilling of a workforce to serve long term military shipbuilding/ship repair, as well as the transition of excess workers into the wider engineering sector. The potential opportunities to address skills needs in other SE priority industries are being actively considered.
22. Approaches have been adopted to best address local needs and optimise local delivery within the context of this national project.
23. The Aircraft Carrier Alliance members ("Tier 1" companies) are involved directly in the management of SMTTP. Both have recognised, and are emphasising the need to engage with the wider sub-contract and supply chain in assessing and addressing skills needs.
Training Provision
24. Based on direct discussions with the companies and within the context of the wider ambitions of the project, the SMTTP's colleges group has taken over management of the college delivery element of the project, with support from SE. The "core" colleges (Anniesland, Carnegie, Clydebank and Adam Smith) involved in shipbuilding/engineering training are now working closely together on course development and best practice delivery.
25. Various actions are planned or underway with the Colleges consortium:
— Inclusion in the consortium of more colleges to address likely peak training demand.
— The planned development of a new qualification—a Higher National Certificate in Shipbuilding. Such a qualification is understood to be unique in the UK, a signal of Scotland's intent of continued involvement in this industry.
— A joint bid to the Scottish Funding Council, supported by SMTTP members, covering teaching capacity and strategic funding for additional facilities development.
— The potential development of an e-learning approach to course delivery.
26. It is recognised that in undertaking training for the shipbuilding industry, the use of as many existing broader engineering course elements is essential in order to ensure the transferability of skills into the wider engineering sector. The potential opportunity for private training providers, beyond those already engaged by the companies, will be explored.
RECRUITMENT
27. Comprehensive plans are now being put into place to promote employment opportunities in the industry. With support from the employer's organisation, Scottish Engineering, these will promote not only the long term opportunities in shipbuilding, but also the wider opportunities in the engineering sector.
28. While the concentration for recruitment activity for the CVF project is likely to be around the key construction sites in Glasgow and Fife, there are also opportunities for recruitment from elsewhere in Scotland for both the core yards and the extended supply chain. Recruitment activity will be undertaken via the JobCentre Plus network on a national basis. Careers Scotland is also aiming to enhance its activity in the engineering sector, with Shipbuilding as a focus. SE-led promotional campaigns will not be limited to tight geographical areas.
MARINE SUPPLY CHAIN
29. Scottish Enterprise recognises the potential opportunities that exist from the development of a supply chain to serve defence shipbuilding. SE has commissioned and is now assessing the results of a comprehensive study of those companies involved in the marine sector, necessarily a complex exercise based on the fact that many companies are not involved exclusively in marine. The initial study results indicate that some 1,500+ companies in Scotland have at least some involvement in the marine sector. SE will assess their needs for support to enhance business performance, to increase opportunities to engage with the "Tier 1" companies in Scotland and their opportunities to engage in the marine market globally.
30. With a view to maximising the opportunity for Scottish companies to engage with the "Tier 1" suppliers on the CVF programme—and indeed on all future defence shipbuilding and ship repair projects—SE is also now working with the "Tier 1" companies to increase awareness of contract opportunities, aimed at extending the benefits to the wider Scottish marine supply chain.
ISSUES
31. The CVF project is seen as a significant opportunity to boost employment in the short term. However, stability is essential if people are to be attracted to the industry on a sustainable long term basis. The high tech engineering capabilities and capacity of the major yards is undoubted. Defence shipbuilding and repair activity provides an opportunity to develop and maintain a highly productive workforce with long term job prospects, and to increase the chance of winning export work for the shipbuilders and the Scottish supply chain. Careful consideration needs to given to the actions required to maintain a strategic capability in defence shipbuilding.
32. The nature of major shipbuilding projects is such that there are variable demands for different trades during the build programme. With a multi-ship programme this means that a production line approach can be adopted. With a two-ship programme such as CVF there could be discontinuity in the programme which, in the absence of other work, will impact on the ability of the companies involved to maintain workforces to serve further orders. Equally there is no guarantee of any work beyond CVF, although the MoD is understood to anticipate the need for one capital ship per year in the long term.
33. Careful planning for the incorporation of programmes for the construction of lower complexity military vessels (those which might otherwise in a stand-alone programme approach be considered for offshore manufacture) could instead:
— help to de-risk the "core" onshore naval ship programmes;
— providing opportunities for developing and maintaining workforce skills;
— effectively utilise hard-won staff experience and knowledge;
— help justify further expenditure on, and utilisation of ship construction assets;
— spread the overhead costs that might otherwise have to be borne by the "core" naval projects; and
— help secure economies of scale.
34. The "core" programmes such as Type 45 and CVF provide the opportunity to safeguard and to increase shipbuilding and engineering employment in Glasgow and Fife (and elsewhere in the UK). More workers will be attracted to join the industry—traditionally not seen as providing job certainty and therefore not attractive—if there is surety of long term employment. Combining CVF with other programmes, including ship refit work, has the potential to help secure both economic advantage and the benefits set out above. Additionally properly planned, multi-programme planning which enables the flattening of workflow peaks will help further improve job security and the attractiveness of the industry as an employer.
35. The defence electronics industry in Scotland is also starting to report a shortage of graduates in the necessary engineering degree courses, as reported throughout Western Europe and USA, in particular systems engineering, design engineering and electronic engineering. This is occurring through the lack of interest in engineering as a career option. SE has led initiatives to increase the interest in engineering for school-leavers and has worked with other agencies in the UK to address this. However further support is required to ensure that the career opportunities available in engineering are encouraged and promoted.
CONCLUSION
36. The defence-related industry in Scotland contributes significantly to the economy. SE is focused on ensuring that the industry continues to develop and grow and that the benefits are extended into the wider supply chain. The defence electronics industry in Scotland is a key employer and it is recognised that skills shortages of graduate engineers is starting to impact companies in Scotland in line with the industry in the UK and beyond. Lack of interest in engineering as a career option is considered to be a significant factor.
37. The future business success of the defence marine industry is reliant on a number of inter-related factors. Scotland needs to ensure the maintenance and development of a highly skilled workforce capable of meeting the needs of the MoD as customer for the design and construction of complex military vessels, systems and equipment. Focussed on the CVF programme as a major opportunity, SE has developed a coordinated approach to recruitment, workforce development and training, SMTTP.
38. SMTTP recognises that the defence shipbuilding industry also represents an opportunity to attract people into the wider engineering sector and will provide for the re-training and re-skilling of the workforce as necessary to serve the long term needs of the marine sector and the wider engineering sector.
39. An integrated and Scotland-wide approach to training is being pursued via coordination of the further education colleges involved, and Scotland's commitment to the industry will be under-pinned by the development of a new Higher National Certificate in Shipbuilding/Ship-Repair, offering those aspiring to a career in the industry the ability to train for a recognised qualification.
40. The potential for the military shipbuilding programme to provide a market opportunity for the wider supply chain is also being addressed by Scottish Enterprise in concert with the "Tier 1" contractors.
41. There are a number of issues facing the long term viability of the defence shipbuilding industry in Scotland. SE is concerned that a failure to address the need for a balanced and consistent pattern of demand for defence vessels will not only undermine the strategic UK and Scottish shipbuilding capability, but will deter people from entering the industry. A measured approach to defence contracting will not only secure a long term future for the industry, but will also help to secure Britain's place as successful exporter of military ships.
Scottish Enterprise
January 2008
APPENDIX A
ORGANISATIONS INVOLVED IN THE SCOTTISH MARINE TECHNOLOGIES TRAINING PROJECT (SMTTP)
— BAE Systems Surface Fleet Solutions
— Aircraft Carrier Alliance
— Scottish Funding Council
— Further Education Colleges
— Carnegie College (formerly Lauder College)
— SEMTA—Sector Skills Council for Science, Engineering, and Manufacturing Technologies
— Glasgow Southwest Regeneration Agency
— Glasgow West Regeneration Agency
— Local Authorities (Fife and Glasgow)
— Scottish Enterprise—Shipbuilding/Marine Sector Priority Industry Team
— Scottish Enterprise—Skills & Learning (to become part of Skills Development Scotland)
— Scottish Enterprise—Local Enterprise companies
3 See www.scotland.gov.uk/News/Releases/2007/09/26143846 Back
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