Examination of Witnesses (Questions 320-339)
MR VIC EMERY AND MR IAN MCMAHON
1 APRIL 2008
Q320 Mr McGovern: Ian, yesterday in the meetings we had with BAE and Thales and, indeed, with various heads of colleges, et cetera, for me there seemed to be a surprising level of uncertainty about what Scottish Enterprise's role is in helping the shipbuilding industry. Do you believe there is a case for promoting stronger links and more communication?
Mr McMahon: First of all, I would be surprised that was the attitude you were getting, particularly from the colleges. In this industry in particular we have been working extremely hard to make sure the colleges are involved throughout under the Scottish Marine Technologies Training Project, SMTTP, which I have put together over the last couple of years. We have a specific colleges group. We have now got seven Further Education colleges working together to develop additional facilities. In Scottish Enterprise we are funding the development of what will be the UK's only HNC qualification in shipbuilding as a method of trying to encourage people into the industry. We have been working very closely with the companies involved in the shipbuilding industry and Vic will be aware of this in terms of the overall assistance that he has had over the last few years. This includes two tranches of regional selective assistance towards capital investment in the yard and in the design system which they are now installing to use for CVF and for future vessels, in addition to which we have also given grants for management training and workforce development. The company has also been involved in programmes which Scottish Enterprise has put together in lean manufacturing and lean management. There is a significant amount of help going in there, so that is why I am very surprised at those comments.
Q321 Mr McGovern: Perhaps I should rephrase it. When we asked each of these various organisations whether they felt that Scottish Enterprise was doing as much as they could, there was uncertainty, they were unsure whether Scottish Enterprise could do more or not.
Mr McMahon: I hear what they say. We have further plans in train to try and do even more than we are currently doing. We are currently speaking with Vic's team about additional research and development activity and how we might support that under schemes which we have that are replicated nowhere else in the UK. I extend this beyond the immediate shipbuilding industry into other sectors. We already are working with the likes of Selex Galileo, Rolls-Royce and numerous other companies to provide research and development support. We are looking to maximise the opportunity and skill in the supply chain. Again, I led evidence in the written evidence about the work we are doing to bottom out the naval and marine supply chain in Scotland. We already have a supply chain directory for the aerospace and defence industry and we are seeking to get greater levels of engagement. I am engaged with both Babcock and BAE Systems and the Aircraft Carrier Alliance supply chain directors with a view to bringing them together with Scottish companies to explore further opportunities for supplying into the carrier contract and beyond. Again, I would not characterise those comments as being fair.
Q322 Chairman: For the record, let me state that industry representatives were not critical of your role, in fact they were very clear that whenever they came and approached Scottish Enterprise they got the necessary support and they got engaged, the only one issue with the colleges and the others concerned was that you are not proactive, you are not reaching out to the industry. From anyone who came to Scottish Enterprise there was no criticism, but the industry and other people were saying that your role should be proactive and you should be reaching out to industry with what is on offer from Scottish Enterprise.
Mr McMahon: Again, in the case of the colleges, I am not sure who was giving you those comments but they are unwarranted because we approach the colleges directly and have been pulling the colleges together because the colleges were not working closely together, particularly the east and the west coasts.
Q323 Chairman: Ian, if you ask any organisation, BAE Systems or any other organisation, can they do more, or if you asked the British Government can they do more, everybody is going to say yes, they can do more.
Mr McMahon: I think that is probably true. What I would say in terms of the companies we are talking about here, BAE Systems is account managed, I know that because I am the account manager for BAE Systems. Each of the large companies are account managed, they have someone dedicated within the Scottish Enterprise organisation to spend time with that company exploring what the opportunities are. That is how we regard our success, if we are able to engage with those companies.
Q324 Mr Davidson: The difficulty for me in hearing what you are saying and having heard what was said to us yesterday is that to some extent there is a mismatch. The point was made, I am trying to remember exactly what the simile used was, it was akin to being in somewhere like a locked garden and if you knew exactly where the door was and you knew exactly where the key was and you asked for what you were after and you knew it was there, yes, you would get it but you were not always made aware of what the range of opportunities were and what was available. I think that was the point being made to us, not that you were not responding when asked, but the view was that you had to know what you were asking for and then you were helpful in providing it. There is clearly an issue there.
Mr McMahon: The comment is clearly understood and obviously I will pass back into the system that this is a concern. If you are able to give me specifics on that, I might be better able to answer more of those comments now, but if you do want me to pick that up with the account managers from those companies, I will happily do that.
Mr Davidson: It seemed to be a general issue which was echoed back to us. It is always a bit difficult when people tell us things and we then shop them.
Q325 Chairman: One thing I want to make clear, because I was in those meetings, is there was no criticism of you not doing anything, but we are living in a very ambitious world. A few people say that MPs can do more. If you asked my constituents, "Is Mohammad available here all the time?" "We never see him", so you should not take it to heart.
Mr McMahon: Understood.
Q326 Chairman: You cannot be available to everybody.
Mr McMahon: Absolutely.
Mr Emery: From my interaction with Scottish Enterprise there is a lot of dialogue with the universities and the colleges. Some of those colleges and universities are represented on what were the boards of the Local Enterprise Company, and that was wound up as of yesterday, so there are a lot of people who know about what Scottish Enterprise can do for training and industry. I think it is correct to say that you do need to know your way around in order to be able to get into the system and more could be done in order to advertise that or enlighten people a little better. As far as the things which Ian is doing, you have seen a video this morning which is hot off the press and that is designed to encourage people to come into our industry and be trained as engineers. Ian has sponsored an HNC course in shipbuilding, which is the first time that has been done. There is work which is ongoing to broaden the knowledge base.
Q327 Mr Davidson: Ian, can I turn to you about this question of export orders because we have been hearing from Vic it is likely the capacity of the yards will reduce unless export orders are won and there are clearly difficulties in winning these. What is the role of Scottish Enterprise in helping win export orders, and what have you done to date?
Mr McMahon: There are two comments there. One, if anyone does not believe that BAE Systems does not have a great export sales department, then they are sadly misguided. The industry itself knows exactly what it is doing and is out there trying to win orders and we will support whenever we can. I think the opportunity does also lie for the marine supply chain. One of the reasons we are getting behind in understanding what we have got out there is because—it is my personal view—I do not think the companies in Scotland have been as proactive as they might be. That is not a general comment across the board, there are some companies out there that are actively promoting. One Glasgow company has a plant in China in addition to the very large plant it has here in Scotland as one example. I think there might be opportunities for companies who have not yet thought about the export market in the marine sector to start thinking about that. One of the reasons why we are involved in this is to try to find those companies and then put to them some of the offers we can make in terms of supporting them into overseas markets through the likes of Scottish Development International where we have established offices around the world. It is an iterative process, we have to get in there and find out who is there and then move on.
Q328 Mr Davidson: One of the issues surely is that the base load of the marine supply chain is dependent upon there being a big buyer, British Aerospace for example, to be providing them with those orders and I understand that you will then want to climb on top of that. Coming back to the question of maintaining BAE Systems in the west of Scotland in particular, having mentioned the merits of the export division, is there a role for yourselves in that? I am not quite sure whether there is a right or wrong answer to that, but I want to be clear about whether or not you leave it to the company in the circumstances or whether or not you see yourselves as having a particular value which you can add.
Mr McMahon: If we can add value we will do. I think it is a case of BAE Systems knowing its own store, if you like, it knows exactly how it needs to go out and get that business. If at any time Vic or the team at BAE Systems are looking for assistance from our overseas offices, we would be more than happy to help on that. I think there are also opportunities for us to assist. For instance, on one contract which is coming through at the moment, whilst we are not able to assist directly in terms of training support staff for the overseas market, certainly we will be in the position to train the people who will be working on that contract in Scotland. Yes, there is a training element to it and a workforce development element to it, but if there are other things which BAE Systems want from us, then we will be more than happy to consider that.
Q329 Mr Davidson: I will just clarify with Vic, has there been anything you have looked for from Scottish Enterprise which you think they have not been able to provide?
Mr Emery: No. I do not think they have been lacking at all. Scottish Enterprise is there to create the environment to do good business and it will help in our efficiencies, but when you are in the export market you are into a political regime. We are the sales end of our business. The marketing end is done out of London through Stirling Square in our head office and, to be honest about it, there is very little that Scottish Enterprise can do there except through their local offices to help us in-country. In one of the contracts which Ian is referring to, a contract we are about to get, hopefully, there could be upwards of 350 local people who will be trained here in Glasgow and that is a great benefit to the overall economy, not necessarily shipbuilding but the fact that capability is here in Glasgow is helping us to put those apprenticeship schemes in place.
Q330 Mr Davidson: Continuing with the question of exports. My understanding from your point about what we heard before about the export division being run out of London is that many of these deals will end up being government-to-government and, therefore, the strength of the United Kingdom is a benefit in regard to assisting with export sales. Is that a fair assessment?
Mr Emery: Yes, it is .
Q331 Mr Davidson: A constitutional change might change that position and undermine the credibility of the export support which was available from a weak government.
Mr Emery: That is an area which is not my expertise.
Q332 Mr Davidson: Very diplomatic!
Mr Emery: We do need to get government support from wherever that comes from. It is important to us. A lot of these high profile contracts are very political, and if you are a friendly country with the country you are trying to sell in, you have a better opportunity than if you are a hostile country, therefore the political environment in which the UK, Scotland, operate is very important.
Q333 Chairman: Can you tell us then, over the last three years, for example, what percentage of sales was in exports?
Mr Emery: I cannot give you that off the top of my head but I can get back to you.
Q334 Chairman: Guess. We will not hold you to this
Mr Emery: Over the last three years we have not had an export contract.
Q335 Chairman: The survival of these shipyards on the Clyde is dependent on the MoD orders?
Mr Emery: Yes, and I think that has been put in evidence previously to you by my colleague, Nigel Stewart.
Q336 Chairman: So in an independent Scotland you will have no shipyard on the Clyde without MoD orders?
Mr Emery: Again, you are asking me to get into territory which I am not familiar with. I have no idea what will happen if the constitutional arrangements are changed.
Mr McMahon: One other thing. Looking at the wider defence industry here as well, what I would say is—and we have concentrated those comments on the shipbuilding side—remember that Scottish Enterprise and SDI are very active in the aerospace and defence side. In particular, it attends overseas shows where we take Scottish companies out, or by ourselves, to the inward investment market, the MRO show in the United States is one example, the Paris Airshow, Singapore; Tokyo is being considered for later this year and we are involved in Farnborough, so there is a lot of activity in the broader defence sector, just to clarify that for the Committee.
Q337 Mr Davidson: To what extent then does the same thing apply, that much of this is government to government or is this very much components being sold and having a route to the market through that?
Mr McMahon: Primarily components.
Mr Emery: On major contracts like capital projects, such as selling ships, the preferred route is either a Memorandum of Understanding government to government or a government-to-government contract. That is our preferred arrangement.
Q338 Mr McGovern: I think you possibly touched on this a couple of moments ago when you talked about the potential for 350 new jobs. Can I ask what opportunities you would see in the future carrier programme? Would it be mostly consolidating and stabilising the industry or would there be opportunities for up-skilling, multi-skilling and re-training, et cetera?
Mr Emery: I can tell you for the business I run at the moment it is maintaining the existing workforce. In fact, I suspect that a lot of the skill sets which we already have, and we are updating those on a regular basis through our apprenticeship programme, will be needed in some of the other alliance partners which are party to the aircraft carrier contract. From my company's point of view, it is maintenance of the existing workforce which is important to us rather than growing it any more. That may not be the case in other areas, but it is certainly the case where I am.
Q339 Mr McGovern: The point I am making is not so much about growing the workforce as the skills which will be maintained or improved within the existing workforce. The trade union reps were saying that there are union learning reps, there are people training in computers, I think they mentioned people who were regarded as ancillary staff being upgraded to learn new trades, is that going to be a benefit of the future carrier programme?
Mr Emery: Generally speaking, we are trying to upgrade everything that we do to get away from the perception that we are an old-fashioned shipbuilding company and are actually much more of a systems engineering company and we try and upgrade our people to benefit the business and themselves to the greatest extent we can. We support any union sponsored programmes. For example, you mentioned computer literacy, that is a union sponsored programme which we have endorsed and supported and have provided the assets for that to happen. It is a partnering arrangement between ourselves and the trade unions. Yes, because when we bring in apprentices we have quite a large number of applicants, we are able to select people who can go on and grow in the business. I mentioned before the fact that we cannot get enough engineers in terms of draftsmen and professional engineers, and we are progressively moving to allowing some of the guys who have come in to do apprentices to up-skill to go into the engineering offices, which was not the case five years ago.
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