Examination of Witnesses (Quesitons 60-79)
MR DAVID LOCKWOOD, MR KEN MUNRO AND MR NIGEL STEWART
29 JANUARY 2008
Q60 Mr Davidson: Can I move on to clarify the impact of the carrier? Angus asked a point about creating new jobs as distinct from consolidating existing ones. As I understand it this would provide more security for the existing workforce but would not involve an enormous expansion of the numbers. Am I right in thinking that because of the age of the workforce there would actually be a substantial number of vacancies as the existing workforce left the industry therefore there would be considerable recruitment over this 15 year period?
Mr Stewart: As you are very much aware we have a very active apprentice programme out of the Clyde; we have taken on an average of 100 people each year over the last five years. We will sustain the overall numbers but we will need to keep on taking apprentices to look at the natural attrition that will happen at the other end of the scale. At the moment we plan to take on a good number of apprentices.
Q61 Mr Davidson: Are you aware that you do not take enough apprentices on from my constituency.
Mr Stewart: I am fully aware of that.
Q62 Mr Davidson: Can I ask about employment figures relating to sub-contract work? Not all the work relating to the Clyde block is going to be done in the job, so what efforts are being made by the company to ensure that the sub-contract work is drawn up in such a way as to be accessible to Scottish companies in particular and not be of a size that could not be dealt with in Scotland or elsewhere in the UK and therefore have to be put abroad?
Mr Stewart: There are different parts of the supply chain as you are aware. The carrier is built in four large lower blocks which are allocated around the various yards. Then there are the upper blocks constructed or procured in smaller arrangements. We have actively gone out to the supply chain in the whole of the UK to look at what capabilities there are there so it can be built in the UK. Then there is equipment for the whole ship and the material selections and the procurement strategies are run from the alliance centrally. Certainly I think all suppliers in Scotland or England or whatever have had the opportunity to register with the alliance so when the competitions come out they will be able to compete for that work.
Q63 Mr Davidson: Are you satisfied that Scottish Enterprise Glasgow have been working closely enough with yourselves to make sure that companies in Scotland are aware of the opportunities and where they need to gear up investing in equipment or investing in labour force in order to be able to bid for work from yourselves that that has all been done?
Mr Stewart: I think it is important that Scottish Enterprise also work not just through BAE but through the alliance as a whole because, as I say, it is not entirely in the BAE gift or Babcock's gift to actually direct where the procurement will go. If we are looking at contracts for items that will be fitted in each block across four sites obviously as an alliance we do not want to go to four different suppliers for the same piece of equipment otherwise that is not going to be the most cost effective way to do it. It is very important that the equipment selection is done through the alliance, looking at the best value for money for the overall programme and not just what BAE will do.
Mr Munro: I think Scottish Enterprise Fife particularly are mobilising surrounding employers, particularly those with an interest in engineering work and bringing them to us and very much working with them in terms of business improvement, so not just introducing them to the potential work at Babcock but also encouraging them to improve their workforce and processes. I think also the Scottish Enterprise in Glasgow are certainly working very closely with representatives from BAE Systems and Babcock and the local colleges in terms of getting the best out of the skills programme for both of our work forces. I could not comment specifically on the supply chain on the west coast, but certainly it works on the east coast.
Q64 Mr Davidson: I understand, having spoken to people both in the unions and the Member of Parliament covering Barrow, that they are unlikely to be able to find sufficient sub-contractors within their immediate area to tackle all the sub-contract work that they all have. In order to make sure that that work does not go abroad have you been liaising, as part of the alliance, with Scottish Enterprise to make sure that Scottish companies are aware of all the opportunities that might come up from the blocks constructed elsewhere in the UK and not just simply in Scotland?
Mr Munro: I think each of the alliance partners, through the management itself, all the industrial partners have been encouraged to engage with their local enterprise companies—of course it is slightly different with Barrow—and engage their local supply chains. I have no reason to believe that that is not going on across all sectors.
Mr Stewart: We have had similar conversations and I think we can do more.
Q65 Mr Davidson: I understand that BAE in Barrow are presently considering bringing in substantial numbers of Polish ship builders because you have labour constraints at Barrow. There is work there that could be done by companies perhaps in Scotland or the work could be sub-contracted out within the UK without bringing in workers who are already trained elsewhere and who presumably would then leave at the end so the skills would be lost. These jobs could obviously be filled by people in the UK and trained up if training provision was made available. Can you comment on that aspect?
Mr Stewart: The alliance in Barrow as well are still looking at exactly how they are going to construct their blocks so there are no final decisions as to how they will do that, but I do not know the specific details of the Barrow site as they are under separate management to the Clyde.
Q66 Mr Devine: I recognised what you said earlier on about the dependency of the MoD both for the contracts and for survival, can you tell us how many jobs there are in each of your sites and in each of your companies and how many sub-contractor jobs do you reckon there are in Scotland as a direct result of the work you are doing?
Mr Stewart: We currently have just over 3,300 permanent employees. We commissioned a report in 2006 from the Fraser of Allander Institute in the University of Strathclyde—some of you may have seen that report—and that concluded that for every direct person that we employ there was an additional .57 jobs created in the community, so it is significant and we had that done as independent research.
Q67 Mr Devine: So that is around 4500 or 5000.
Mr Stewart: Yes, something like that.
Mr Munro: We currently envisage, at the peak of the aircraft carrier, potentially another 650 jobs available in Rosyth, not all of which will be permanent; a total package of about 350 more permanent jobs, some of which have already started. We are engaging quite an extensive apprenticeship programme ourselves and we have also started recruiting small numbers as we build slowly up to what we perceive to be the peak for the aircraft carrier. Additional work will be specifically sub-contracting; a number of services will be sub-contracted and also we will deal with some peaks in the work load by agency personnel. It is also believed we will share and keep a lot of the skills internally via resource sharing potentially between ourselves and BAE systems, as has been tried and tested. In addition to that there is other work eventually to be distributed amongst the supply chain. As Nigel mentioned earlier a number of component parts of the CVF—certainly on the manufacturing side—will be competed for and we do believe there will be other work outside the yard itself.
Q68 Mr Devine: Can you qualify the total number of jobs and the additional jobs at the moment? How many people employed at the moment and how many more are you going to bring on?
Mr Munro: Including apprentices we have increased most recently up to about 1250 and we expect there to be around 1550 to 1600 permanent employees around the site at the peak.
Q69 Mr Devine: Would it be fair to say that from Nigel's research with the Fraser Allander Institute that basically .57 was not an unfair analysis of the knock-on jobs within the supply chain?
Mr Munro: I think it is quite well recognised that there will be a knock-on effect even from the point of view of bringing on apprentices. The apprentice intake across Fife now is higher this year than it has been for some considerable time. Organisations are quite clearly gearing up, albeit there are number of other major contracts obviously going to go on in the area and with similar timescales, but there is obviously a knock-on effect; I could not confirm the specifics of the .57, I have not seen that.
Mr Lockwood: We have about 530 people employed directly on the site and there are about another 80 from outsource people (caterers, security guards and so on) and we are currently looking to recruit about a further 50—over half of them engineers—and that has driven about 50% export and 50% domestic. In our work, because we are the next level down in the supply chain from my colleagues on my right, sometimes the MoD is the end customer and we have passed through the hands of primes.
Q70 Mr Wallace: Is it the case that with such a vastly complex project it is not just the ship building—I recognise in front of us are predominantly people who make their business in ship building or naval vessels—the CVF is designed for joint strike fighter to go on it, perhaps the missiles for the joint strike fighter would be made in Edinburgh at BAE and it will be re-fitted. Where would you expect a carrier of that size to be refitted? How many times have HMS Illustrious and Ark Royal been refitted since they came into service? Would you expect the CVF to be refitted in 20 years or 15 years?
Mr Munro: All the current aircraft carriers are currently refitted at Rosyth to a very high standard which the customer has consistently commented on. The infrastructure is being arranged to bring together and integrate the CVF at Rosyth. Recognising the Ministry of Defence's policy to minimise the numbers of different infrastructures to support similar vessels, one would assume that deep maintenance of the CVF could be carried out at Rosyth.
Q71 Mr Wallace: Can you give a rough timescale? You are not going to build a CVF and that is it.
Mr Stewart: I think the docking period is six or seven years. It is designed not to be docked anywhere as frequently as the current carriers; I think it is once every six or seven years.
Q72 Mr Wallace: That would be a major project when it does come in.
Mr Stewart: Wherever it goes, yes.
Q73 Mr MacNeil: The total jobs involved with this carrier project—not just in Scotland but in total—are what?
Mr Stewart: It will sustain and create 10,000 jobs across the UK. That is the general consensus.
Q74 Mr MacNeil: Are you finding that that is the case?
Mr Stewart: If we look at what we have talked about in Scotland it is pretty significant on that. That is to the best of my knowledge.
Q75 Mr MacNeil: In places like Scotstoun or Govan are you needing to take in many people from Eastern Europe as it seems many employers are throughout the UK?
Mr Stewart: We have taken very few; I think we have got approximately 20.
Q76 Ms Clark: I understand that the construction of the aircraft carriers is going to involve new ways of working. What investment is required from industry to ensure that both the workforce and other resources are capable of delivering the project on time and to the required standard?
Mr Stewart: I think there are two different types of investment. There is investment in tools and facilities and certainly across all the yards I think each yard has invested in new design tools over the last two years for the programme. There will be significant capital investment, particularly in Rosyth, for the carrier. Very much in terms of skills of training there is an on-going skills and training programme; there is specific alliance training for all the staff within the team.
Q77 Ms Clark: To what extent are there changes in methods of production that need to be catered for?
Mr Stewart: We are always looking to continually improve; that is the nature of the role that we do. What we have done and what the alliance brings is continually sharing best practice in new ideas across the alliance. If one of the partners has got a recognised best practice area then we try to share that for the benefits of UK industry and we found some good examples of that over the past few years.
Q78 Ms Clark: We talked earlier on about the proposed 15 year minimum guaranteed work load for the joint venture. Is there a risk that incentive may reduce the ability of the venture to be globally competitive?
Mr Stewart: No, because what the joint venture and what the terms of business agreement do is guarantee what are called key industrial capabilities so there is a minimum level of skills that we need to retain over the 15 year period which will be covered by our orders or other means. We would certainly not want that to be purely the size of the business; that would be a far smaller business that we envisage so we will be globally hungry to look at the export business and to look at longer term support contracts and new ways of working there.
Q79 Ms Clark: So you do not think there is any risk that it could reduce competitiveness.
Mr Stewart: No, the levels will still mean that we have to be very competitive to help grow the business. We would not want to run the business at purely the minimum levels in the terms of business arrangements.
Mr Munro: I think it is fair to say that the other area of investment is in skills. We work very closely again with my colleagues in BAE Systems along with Scottish Enterprise to build more flexibility into our skillbase so that our apprentices are multi-skilled as opposed to single-skilled. We have a number of large programmes carried out last year and before in terms of up-skilling craftsmen so again there is multi-skilling there. We are also creating and recovering new skill areas such as Higher National Qualifications in ship building which has been effectively off the front for some time. The other aspect is looking at a fast-track adult apprenticeship so we can engage with some of our older workforce people who have skills—hand skills but not necessarily in the ship building industry but creditable hand skills—and fast-tracking them through apprenticeships so we can engage in that kind of labour pool as well. There is a lot of investment going in.
Mr Stewart: As part of the apprentice training programme we work very closely with trade working groups as well, with the Anniesland College and the Clydebank College, so as well as purely just looking at the lecturers in the college structure perhaps lecturing on what they knew ten years ago in the ship building industry, we have an active trade group with the group from the production facilities, with the trade unions, with the instructors working constantly to develop the programmes around what we need for tomorrow and not what we needed yesterday. That is quite important to help make sure we are continually looking at modern best practice.
Mr Munro: Those colleges are actively participating and are involved both across the Forth Clyde Valley with Anniesland College and Carnegie and Adam Smith in Fife, again all part of that collaboration in terms of developing that skill base.
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