Examination of Witnesses (Questions 400-419)
MR VIC EMERY AND MR IAN MCMAHON
1 APRIL 2008
Q400 Mr Davidson: Another element of Government policy, particularly in Glasgow, is the drive to try and get people off benefits and into employment. In terms of shortages of manpower, personnel, do you think there is much scope for the shipbuilding industry to play a part? We were not sure whether or not there was on the basis that many of those who have an invalidity, perhaps have bad backs and the like and, therefore, a lot of the work involved in shipbuilding might not be suitable. Nonetheless, is this still an area of the economy which could absorb some of these people? Maybe Vic first and then Ian.
Mr Emery: Again, it all depends on the amount of work we have and our primary customer at the moment is the MoD. The more work we get, the more people we can employ, it is a simple factor. We are refreshing our workforce too. You will have done the sums for yourself. Out of 4,000 people, which is our full employment, about 50% of those work in the offices and 50% work in the industrial area. With 500 apprentices, 25% of our workforce are young people who have come in over the last five years, so that is a very satisfying statistic. We can take the less fortunate or the less educated people provided we have the work to employ them and predominantly those people would be in the steel work trades, that is where the less skilled people would normally be.
Mr McMahon: Within Scottish Enterprise this was one of the raison d'etres behind the establishment of the Scottish Marine Technologies Training Project. One of the things we wanted to do was use the shipbuilding industry as a springboard into the world of work for those people who are capable of it. Clearly what you saw earlier was aimed at being aspirational, lifting the sights of people who so far have not identified the engineering industry or the shipbuilding industry or, indeed, any job as something they need to be getting into. Essentially, we will be attempting to excite people in. That will be one aspect of the work we will be doing. We are also looking at the people who are currently not in work, but perhaps have the core skills or existing skills to come into the industry. One of the things we are piloting at the moment is a new accelerated adult apprenticeship, the ability to have someone come in, do an initial skills assessment and then get them through an apprenticeship programme in two to two and a half years, 18 months to two years would be the ideal rather than the full four-year apprenticeship, provided they have got some skills coming in.
Q401 Mr Davidson: Is there a formal relationship between yourselves and those who are trying to get people off benefits and into employment?
Mr McMahon: JobCentre Plus is involved in the Scottish Marine Technologies Training Project, Glasgow Southwest Regeneration Agency and Glasgow West Regeneration also. We have agreed already with Glasgow Southwest and Glasgow West that they, along with JobCentre Plus, will be the route to that particular marketplace under the Scottish Marine Technologies Training Project because they have the skills and expertise in that area.
Q402 Mr McGovern: Ian has just touched upon the question I wanted to ask. You said there are 500 apprentices, which means that 25% of the workforce are comparatively young, how does the company view adult apprenticeships?
Mr Emery: We do a lot of work. Of the £5 million we spend a year, about half of that is on apprenticeship schemes and the other half is on retraining and adult training, so we are doing a lot of that as well.
Q403 Mr McGovern: For me there is a difference between training and actual apprenticeships. How does the company view adult apprenticeships?
Mr Emery: We do not have adult apprentices, we have adult Further Education training, so we take someone and train them. It depends when you call an adult an adult. If it is from 18 years onwards, then we do take those people and train them to go into our engineering function, for example, and we give them additional education to do that.
Q404 Mr McGovern: We heard from Peter Hughes yesterday and I cannot remember the name of the organisation he represents.
Mr McMahon: Scottish Engineering.
Q405 Mr McGovern: He said why should somebody be regarded as thrown on the scrapheap because they are 25 years of age. He certainly sounded to me fully committed to adult apprenticeships and I thought possibly he could liaise with you on that subject.
Mr Emery: We are a member of Scottish Engineering as well and I sit on their committee. I have no objection to adult apprenticeships. It could be another name for retraining adults or adult education. I do not mind what we call it as long as we give the people who want to progress and improve themselves the ability to do that.
Q406 Mr McGovern: Could someone be recruited to BAE Systems at the age of 25 or 26 and start an apprenticeship as a plater or a sheet metal worker or a welder?
Mr Emery: Yes, he could.
Mr McMahon: Similarly, what you are also looking to do is potentially upgrade people with, for example, general labouring skills within the workforce who have seen a job being done partly and know something about it, so they may be able to develop some hand skills or some job knowledge. The whole idea of this pilot is to come in and do an initial skills assessment—this is the one we are working on with Skills Development Scotland and SEMTA—and then there is a framework of training in place which has been devised by Carnegie and Anniesland Colleges which will get them through to being a fully trained workman in a shorter time because they have come in with initial skills. The three areas we are going to be tackling for these frameworks initially will be the steelwork and plating side, the electrical engineering side and the electrician side, and the mechanical engineering side. Post the development of these frameworks, which should be in place within the next two or three weeks, the next move on that is to pilot a programme of six adults into BAE Systems and six adults into Babcock Marine to see how fast we can get them through the process. In the interim, Babcock has started with 17 adult apprentices in the current year. They took on 50 apprentices last year and 17 of those were adults.
Q407 Mr Davidson: One of the points which Scottish Engineering raised with us yesterday when we met them informally was what they saw as a contrast between the amount of support available for indigenous companies, existing companies, and the much greater amount of support available for incoming companies and inward investment. I have heard this before. Is that something you have also picked up or is there any truth in it?
Mr McMahon: I have picked it up and it is a fallacy.
Q408 Mr Davidson: If it is a fallacy, why do people believe it?
Mr McMahon: I do not know. The majority of money in regional selective assistance each year goes to indigenous companies, not to inward investment companies, and training support is available to any company. It is a fallacy. The majority of money each year goes to indigenous companies.
Q409 Mr Davidson: That is not quite the same thing. It is entirely possible to have the majority of the money going to existing companies and have better availability for incoming companies, is it not, the two are not mutually incompatible? You can be more generous to those incoming companies but it is still the case that most of your money goes to the existing companies but not on the same terms. It was Scottish Engineering that gave us this line yesterday and we were struck by it. If they believe that then obviously, again, there must be some issue of communication.
Mr McMahon: I think probably, yes. Mr Davidson, I am aware that it is a common perception and I have challenged it on several occasions with Regional Selective Assistance Scotland—RSA Scotland—and they have assured me that is not the case. It is freely available and spent at the same levels.
Q410 Mr Davidson: Who is the fallacy buster then? Whose job is it to stop the fallacies?
Mr McMahon: RSA Scotland has issued press releases and all sorts of things on that basis. I know the Ministerial announcements and each time they announce the statistics there is usually a comment somewhere in there in a note to editors which will say the percentage that goes to indigenous companies.
Q411 Mr Davidson: Does the same thing apply to training grants?
Mr McMahon: Yes, there are a couple of extras. The project has to be mobile, in other words it has to be something you need to do to attract to Scotland. There is a grant system called Training Plus which would not be routinely available to Scottish companies, however, there are other training grants which are available to Scottish companies, in terms of our workforce development powers under the frameworks in which we operate, which would not necessarily be available to overseas companies. Quite where the balance lies, I am not sure, I do not have any definitive figures on it, but what I am able to assure you is in terms of Regional Selective Assistance, that is the case.
Q412 Mr Davidson: You can understand why we are concerned when people tell us that.
Mr McMahon: Absolutely, I understand that.
Q413 Mr Davidson: Can I ask about the MARS contract and about the additional memo you sent us. When we were speaking with yourselves and others yesterday I think you were indicating that the timetable of demand would mean at least two of the ships could not be done here because you would be full up to capacity, but presumably the other four could be. Am I right in thinking that one of your anxieties is that the consequence of having gone down the European Journal route might be that if you had the capacity to take four of them in the UK you might be precluded from doing so and the British Government might be precluded from doing so by the application of the EU rules. Is that precisely your point?
Mr Emery: My point is that by advertising the MARS contract in the European Journal the MoD opted out of Article 296 of the European Constitution which, if they had insisted on keeping that would have allowed them to direct that work to a UK operation. By removing yourself from 296 you are now in international competition which is where MARS currently sits. As a company we have responded to that inquiry in the European Journal because it is the only way we could respond and we are subject to European competition as a result of it.
Q414 Mr Davidson: When discussing this informally with people from the MoD, we were being given the impression that their view was they were not precluded under the system they have gone down from pulling that back in. Certainly, if they did pull it back in, then that would make a great difference to the yard, would it not, but at the moment there is a degree of uncertainty, is that fair to say?
Mr Emery: I think the main concern everyone has is the uncertainty of the situation. Clearly our legal advice is that it will be very difficult to extract yourself now from the European competition rules as a result of the actions that the MoD took. I have raised that subject with the MoD and they are equally certain that they can extract themselves and this is a classic situation that we face. I hope they are correct because the industry needs some certainty going forward, either in the form of the aircraft carrier programme or a replacement for that programme if it were not to go ahead on its original dates and if there was some other delay to the programme, who knows? You need to be able to have some mechanism of filling the void in the unemployment which that would create. Therefore, I certainly hope the MoD is right and I am wrong.
Q415 Mr Davidson: Following the discussions yesterday, my understanding was if there was slippage in the carrier there was no potential for the MARS ships to be brought forward because there was no design upon which steel could be cut at the present time. Is that a correct position?
Mr Emery: The MARS ships are in three different categories. The first ships under the MARS programme are generically referred to as fleet tankers. Those fleet tankers are a new design. It has not yet been designed. In fact, the design in outline terms has been issued by the MoD, but each of the companies that have responded will have their own design to meet the requirements set down in the documents. Therefore, it depends on the degree of the delay to carrier if, indeed, a delay does occur, and I am not sure whether one will or not to the planning dates, but if there were delay to the carrier, dependent on the extent of that delay, you may or may not be able to put the MARS ships in that gap.
Q416 Mr Davidson: You may or may not be able to put it in the gap because it will depend upon the design and it also might depend upon whether or not you were deemed to be abiding by or not abiding by EU rules.
Mr Emery: Yes.
Q417 Mr Davidson: Chairman, it sounds like a case for a referendum on these questions, I digress slightly. One of the things which has been drawn to our attention is what would seem to be an apparent conundrum. That is, on the one hand, you are recruiting lots of apprentices—and I think you have indicated that there would not be a tremendous increase in the number of jobs available, it would be the maintenance of the existing number of jobs—yet, on the other hand, Ian is saying there is a labour shortage and there is a requirement to get more people for the industry and it is a question of how these two things are married. Can you clarify that?
Mr Emery: The apprenticeship programme is put in place because we analyse our future workload. We put down an estimate of what each of our projects will require in terms of manpower, skill by skill, trade by trade and we plan that out for the next five to ten years, therefore we can look forward at the future requirements that we need. When I came into this job the average age of the employees was 49 years old and, therefore, you could argue that back then in 2002 no-one who currently worked for me would be working on the aircraft carrier, there would have to be a whole new organisation. It is not only about addressing the workload, it is about addressing the age profile and refreshing the skills sets as well. It is not one dimension.
Mr McMahon: My comment would be, with all respect to Vic, that BAE Systems Surface Fleet Solutions is not the only game in town, there are other companies involved, for instance Babcock Marine, which has not had the same benefit of a good and growing workload that BAE Systems has had. It is working from a smaller base load of workers and needs to figure a way of getting people into the workforce. Similarly, Vic has talked about his supply chain and the outsourcing work that company is doing. We have got to figure a way of getting skills in there as well. My conservative estimate as to the number of people we are looking to train to hit the absolute peak on CVF could be up to 1,000 people, taking into account attrition rates in the yards and that is what our support programme I was talking about earlier is predicated on.
Q418 Mr Davidson: The final point I want to make is the question of after the carrier when lots of these people will not be required for shipbuilding directly. Do I take it the skills they will have at that stage will be transferable into other industries, other Scottish employers and so on and so forth?
Mr McMahon: Absolutely. As I mentioned earlier, our support for the new HNC in shipbuilding is based solely on the fact that everybody will have a skill that is transferable. They are using standard, what they term, PEO type (performing engineering operations) skills developed by SEMTA in the skills framework for the industry, so, yes, absolutely, they will be transferable into other industries.
Mr Emery: We train a lot of people who go out of business one way or another and take up jobs elsewhere. Although we have a 90% retention rate on our apprenticeships programme, on our graduates we have something like a 55, 60% retention rate. A lot of the people we spend money on on adult education and re-training disappear into better jobs. There are a lot of opportunities. We are a very, very good training ground for industry in general.
Q419 Chairman: Ian and Vic, thank you for your attendance this morning. Before I declare the meeting closed, would you like to say anything in conclusion, perhaps on an area which we have not covered during our questions?
Mr Emery: No, I would just like to say that I found it an interesting experience and I hope that we satisfied the requirements that you have to enlighten you a little better about the challenges we face and how we can improve on your report at the end of the day.
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