Examination of Witnesses (Questions 240-259)
MR WARRICK MALCOLM, MR ANDY LEATHER, MR JOHN COLES AND MR HANS PUNG
11 MARCH 2008
Q240 Mr Walker: I appreciate that this is the Scottish Select Committee but I do not want to be too parochial on this. People throughout their working career will have a number of employers, it seems, and it strikes me that what you are equipping this workforce with are portable skills, which will enable them to compete in an international labour market. It may well be that you win more contracts or other organisations come to Scotland that can use those skills, but is it not the case that these workers will be able to move to other parts of Europe and actually have skills that make them highly attractive to other projects going on in other parts of the world as well?
Mr Coles: Undoubtedly.
Mr Malcolm: I think that is certainly the case but what I would say is when you speak to the engineering companies and look at some of the stuff in Future Skills Scotland, some of the evidence suggests that if you keep people beyond two years, you keep them for a long period of time in the engineering sectors, so the companies are actually identified as good employers that people want to stay with, and the quality of life itself is another key reason.
Mr Coles: These people when they are trained are highly capable people who have marketable skills for some of the niche skills and things they have, and they are tradable.
Q241 Mr Walker: I think the evidence session suggested that once these aircraft carriers are built and there is no more work these people are just going to sit on their hands and it will be like Liverpool in the 1920s, 1930s and 1940s and that is not the case any more, is it? These are highly, highly skilled technical people who have skills that are in demand possibly worldwide.
Mr Pung: I think that is true. I think people that are highly skilled and highly motivated are not going to want to sit on their hands and not do anything; they will go to where challenging projects are and where challenging opportunities arise.
Q242 Mr Walker: Your challenge is to retain them actually by having interesting things for them to do.
Mr Coles: Retain them on interesting projects that are actually going to be manufactured. The worst thing is to have constant changes to programmes and people just go and do something else, so continuity is key and interesting challenges.
Q243 Mr Walker: This final point, aging workforce, 50% over 45; I notice from the SBAC evidence that actually the number of apprentices coming into the industry is falling, it is now 3%. That is not even replacement. While all apprenticeships are to be welcomed 3% is cause for concern, I would argue.
Mr Malcolm: I know that in BAE Systems Surface Fleet Solutions the apprentice programme is to specifically reduce the average age of their workforce and have been very successful, but you are absolutely right that the sector still has to go a long way to reduce the age profile and that will happen over a period of time, and certainly there is encouraging work ongoing in Scotland on skills, and it should be said that the sector itself has produced its own strategy and skills are a key part of that and we are already sitting down with the Scottish Government, the Scottish Enterprise and the New Skills Agency to see how we can address some of those issues.
Mr Pung: One thing I should clarify is that when I said around 50% that was looking at professional engineers in the naval industry, so accepting defence and aerospace, and it is really looking from work that we did across the UK, but given that a lot of those professional engineers sit in Scotland it is probably fair to make a similar assumption.
Q244 Mr McGovern: The point I would like to make has possibly been covered in part, in particular by yourself, Mr Pung. It has been suggested that over 90% of the work carried out in naval yards is dependent on MoD contracts and the other 10% from private sector contracts. So, if possible, I would like somebody to tell me how reliant are non-naval defence industries in Scotland on MoD work? And as a supplementary to that, what MoD work is currently being planned?
Mr Pung: I am probably not the best person to answer the non-naval work, but the SBAC guys can probably do it.
Mr Malcolm: I would not be able to put a figure on it but I can certainly come back with some evidence in a note to the Committee to give you an idea. I can speak to a council member to get a feel for that.
Q245 Mr McGovern: The supplementary part of it: what is currently being planned by the MoD?
Mr Malcolm: Again, I would have to come back to you on that specific point.
Q246 Mr McGovern: Charles touched upon apprenticeships and the GMV's submission, in my view quite rightly, highlights how important apprenticeships are. So could you tell us to what extent are the benefits of the defence industry in terms of skills and ability? Is it localised or is it Scotland-wide?
Mr Malcolm: I think our submission suggested that the employment was Scotland-wide and I know that BAE Systems Surface Fleet Solutions again did some work with Fraser of Allander Institute to look at the knock-on impact of employment and so on and how many people are employed. So there is certainly a knock-on impact from the sector in terms of further employment.
Q247 Mr McGovern: I think possibly the public perception would be that it is clearly a localised around Glasgow and Clydeside. I am not aware of any major defence contracts in my constituency in Dundee. We have had some major knocks recently in terms of redundancies. Is there anything happening in Dundee that you are aware of?
Mr Malcolm: Again, I would need to come back to you. I know, for example, that one of the strengths is that Dundee is actually in the space sector, which is another area that we looked at as well and Scotland is actually very strong in that, which is another issue that has come up for discussion and a lot of work is going on recognising that and that is certainly one of the things we would hope to address. The CBF contracts will go throughout Scotland; for example McTaggart will be doing the lift mechanisms. So beyond even the BAE Systems and Thales and Babcock there will be significant opportunities for other companies in Scotland. We have certainly already been doing a lot of work with both BAE Systems and Babcock about getting that message out to the SMEs in Scotland to make sure that some of the contracts and some of the opportunities do flow down through the supply chain.
Q248 Mr McGovern: You are probably aware that I am making play for jobs for Dundee.
Mr Pung: I think the other thing to note as well—and you asked a question about localised employment or Scotland-wide employment—is that there is certainly evidence that people who have developed maritime skills in the Glasgow area have been willing to commute to Dunfermline to work in the dockyard at Rosyth and vice versa, as there have been varying demands. So I think that does show that there is evidence that the workforce is slightly portable and is willing to move, but at the same time they may be based in Glasgow but they may work on a regular basis in other parts of Scotland, et cetera.
Mr Coles: Some parts of the programme actually assume that as well, so there was mobility from some of the skill force from west coast to east coast for peak periods.
Q249 Mr Davidson: But not to Dundee.
Mr Coles: Not necessarily to Dundee, no.
Chairman: Can we move on to maximising benefits of current investment.
Q250 Mr Carmichael: In many ways we have already explored some of this with my earlier questions, but we did start to tease out some of the actual programmes you have in place which are designed to ensure the maximisation of the benefits from the future carrier programme. Taking it as a standalone topic on its own is there anything that you want to put forward to the Committee's consideration?
Mr Malcolm: Just to reiterate that certainly we have been very active not just in the CBF programme but much more widely in making sure that the primes in the defence sector through BAE Systems and Selex and so on are much more engaged with the SME community, using programmes as Andy mentioned like SC21, to widen the opportunities through the supply chain and to explain to the SMEs in Scotland and more widely what opportunities there are in research and development and what technologies they are looking for and which capabilities they are focusing on, and just making sure about the communication there, which I think previously may not have been quite as good as it could have been, and we have certainly been doing a lot of work on that and it seems to have been extremely successful.
Q251 Mr Carmichael: Mr Leather earlier in this context, since we are talking about it, made reference to issues concerning IP. What are the particular IP concerns you have?
Mr Leather: It is around operational sovereignty and the reluctance of MoD to let IP go, so you then have a bespoke programme specifically for the MoD. If there was some relaxation around that—and this is work that is ongoing with MoD at present—then you would actually create a product that was exportable and therefore you would have a broader market. But over and above that in terms of broadening the activity there was something that developed out of the AIGT Report in 2003, which was the National Aerospace Technology Strategy, which is going through a refresh at the moment. That has inputs from companies in Scotland and one of the key parts of that is to ensure that we do highlight to the SME community the opportunities that do exist as we look at what we are looking forward in terms of future technology, because there is a belief, anecdotally, that we are not maximising or exploiting the benefits that some of our SME community could put forward. SBAC is running something now called an Aerospace and Defence KTM—we have recently been awarded that—and that very much has SME exploitation, in the nicest possible sense of the word, as part of its remit.
Q252 Mr Carmichael: So how big a barrier to that is the MoD attitude towards intellectual property? This is a matter of contract rather than substantive items of law?
Mr Leather: Indeed, yes. It is recognised that perhaps industry does not invest as much in defence programmes as it would, simply because it has a narrow market.
Q253 Mr Davidson: Can I just follow up that point about the SMEs and the supply chain? It is all very well yourselves making people aware of what is available if they do not have the capacity to reach that level or they are not getting the assistance to move from where they are to where they would need to be. Are there sufficient programmes available in Scotland to help companies make that transition, to be able to bid for sub-contracts from the primes in things like the aircraft carrier?
Mr Coles: In terms of the aircraft carrier, just from previous experience, certainly the opportunities for all companies—that includes Scottish ones—to bid at the SME level for equipment is actually quite clear and many of them are involved—and McTaggart is a good example of one of them. But certainly the opportunities are there; they have to then seize them when they arrive, but certainly they are made aware of the opportunities.
Q254 Mr Davidson: Awareness is one thing but having the capacity to seize, as it were, another, and if these are new technologies and it is moving on to another plain is the assistance there from the Scottish Executive and the colleges to help them make that transition? You have already in your submission that you gave us at 5.2 indicated that training levels in Scotland as a whole are not sufficient. Are they sufficient for the SMEs to be able to make that jump?
Mr Malcolm: I think there is a lot of assistance. I have no doubt that the companies on an individual basis will have very good relationships with people like local enterprise companies and they will do what they can to help the companies make that move. As I say, we are trying to give them the opportunities, and the feedback from the SMEs so far has been very positive in terms of there is a change in the sector in terms of being much more inclusive about giving the SMEs opportunities. Again, from our experience the SMEs are showing themselves very capable indeed of casting their opportunities in terms of contacting the people at BAE Systems or wherever and saying, "We have a bit technology that will solve your problem."
Q255 Mr Davidson: So we should hear no problems then from SMEs?
Mr Malcolm: I am not saying you will hear no problems—companies are always seeking to be better, faster and quicker than the next person, so it could always be better. I think from our perspective what SBAC Scotland is certainly seeing is that the sector has not collectively expressed its view up until now; it has not had the right forum for discussing some of these opportunities until now.
Mr Coles: I can give you an opinion really. Certainly in my time as an official I found other regional authorities—if I use that phrase—much more aggressive in pursuing their interest on programmes and pushing much harder on me and other officials about what was available and coming to talk to me about what they could offer. As an observation, northeast in particular, northwest and, to a lesser extent in the southwest, but I do not remember anybody specifically from Scotland coming to my desk and saying, "What about us?" I do not remember that but I do remember the others doing that and pressing quite hard, and that is just my experience over the last two or three years.
Q256 Mr Davidson: That is a very helpful observation. What I just want to clarify is whether or not you feel that the colleges, for example, are being adequately funded to provide the sort of courses that would allow the companies to move up? In a sense, if you do not make your submissions now and we do not make a report on this it is going to go by the board, so I do not want to hear companies from SBAC moaning to me in a couple of years' time that nobody was aware of this.
Mr Coles: I am talking about the regional development companies in the UK and their representatives certainly made strong representations to me—and other projects, I am sure, in this respect—about what they could offer, what skill sets they had and would invite me to present to them and I did that regularly. So they were quite well informed and quite interested and pushed through the parliamentary system, through the lobbying system about what they could do and what they wanted.
Q257 Mr Davidson: I certainly noted the point that Scottish Enterprise was a bit "sloopy".
Mr Coles: That is an observation.
Mr Malcolm: I think we would say that historically the sector has not behaved as a single cohesive coherent sector with a single voice and so it has not made its case perhaps quite as forcefully as it could have done to some of the key people like the Scottish Parliament, the Scottish Executive and Scottish Enterprise, and as a result perhaps has been a little bit of a poor relative and other sectors have made a much better case for themselves and perhaps have come out better. We are now changing that. That Scottish Enterprise does not even recognise aerospace defence and naval as a sector, as aerospace, is perhaps evidence that the sector has not made that voice as clear as it could have done, and I think that we are now changing that and as a result of that we are hoping that the sector's collective relationship with people, like for their education, the colleges and the universities, will improve because it can be better.
Q258 Mr Davidson: So the Scottish defence business community has been somewhat lazy and incoherent is a fair way of putting it then, is it not?
Mr Malcolm: We would say that they have been busy getting on with running their own businesses individually.
Q259 Mr Davidson: It is another way of saying the same thing. I am trying to see whether or not you are saying to me that you are absolutely satisfied with the amount of support that you are getting for the SMEs in terms of training and all the rest of it to enable them to go for these opportunities, because having been involved as a local member and arguing for the carriers to be allocated, to come to Scotland, one of the main issues was the question of the boost it would give to the SMEs—a one-off opportunity to raise their game—and I want to be absolutely clear that you are satisfied that everything that can be done to support these SMEs to raise their game is being done and, if not, why not? And if you cannot tell us today it would be helpful if you gave us a note in order that we can consider it by the time we produce our report.
Mr Malcolm: I think what we would say, at the risk of turning this into a sales pitch from a Jonathan Ross show, we have just published our strategy; that the sector has, as I say, for the first time come together and sat down and decided what are the key issues for it in terms of skills and in terms of the infrastructure and investment, and in fact within this document is all the issues that the sector is currently raising and we can certainly pass that to you. Within that it should have all the Scottish issues that companies will be raising.
Mr Leather: But there is always more that can be done. There is a huge amount of European money that is available for R & T, there is a lot of UK money. It is quite a difficult process to go through and as an SME it is quite daunting to us to try and approach or acquire European money. So there is always more that can be done, whether that is through education.
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