Memorandum submitted by Unite the Union
1. EXECUTIVE
SUMMARY
1.1. Unite believes the creation
of a higher value added economy can only be achieved when government
and industry recognise that equal weight must be given to the
needs of workers and workers are given a voice and role in the
company decision making process.
1.2. Unite rejects the assertion that
the only way to achieve higher added value manufacturing in the
UK is be extending further the concept of a flexible labour force.
It believes that there are alternative social economic models
which have delivered sustainable manufacturing jobs and growth
elsewhere in Europe without compromising job security to the same
extent as in the UK.
1.3. The UK invests less than other competing
countries in research and development and is lacking in translating
research and development into marketable products. Unite believes
government has a role in stimulating UK investment performance
that does not exploit workers and force companies to off-shore.
The right support for manufacturing investment will help address
the failure to grow productivity at a fast enough rate in comparison
with EU and global competitors over recent years.
1.4. Unite believes it is
the education, training and skills agenda where government needs
to act to create the higher value added economy. In the present
global, knowledge driven economy, a skilled workforce can represent
a distinct competitive advantage. However, this advantage is only
of benefit if there is a highly skilled and highly motivated management
structure within a company. Unite believes government needs to
consider introducing a statutory training levy for employers where
current voluntary arrangements are clearly not working.
1.5. Unite believes one of
the problems adding to the low skills culture is the large number
of mergers and acquisitions that happen in the UK. By advocating
the "national champions" of manufacturing industry in
the UK, government can support manufacturing as a sector.
1.6. Unite believes government
offers a broad definition of what elements constitute innovation.
However, there are significant omissions.
2. INTRODUCTION
2.1. It is clear that the
UK government is focused on creating a high value added economy.
Some of the requirements for that high value economy are already
being achieved:
2.1.3. unprecedented levels of Foreign
Direct Investment (FDI), and
2.1.4. a commitment by government
to further economic growth in the UK.
2.2. There are however, areas
where government and business are not achieving the high value
that is necessary for today's economic climate. Research and development
is an area where UK business excels in relation to quality but
not in quantity and is under considerable threat from the emerging
economies of India and China. Similarly innovation is an area
where the UK excels but there are concerns that the UK workforce
is being constrained in its capability to embrace new innovative
practices due to the lack of investment in education, training
and development.
2.3. Although UK manufacturing
companies have been enjoying a quiet resurgence, the number of
jobs lost in manufacturing in the last ten years is now standing
at over 1 million[212].
A higher value-added economy cannot be created from the service
sector alone. Manufacturing is vital to creating a high value-added
economy.
2.4. Unite believes that both
the public and private sector have a role in helping government
to achieve their goal. For example there are a number of key procurement
initiatives that the public sector could undertake to assist UK
manufacturing industry. The private sector also has a strategic
role in ensuring that the UK workforce continues to be trained
and developed to embrace any future research and innovation within
the UK manufacturing sector.
3. DEFINITION
OF A
HIGHER VALUE
ADDED ECONOMY
3.1. If the UK government
is committed to its pursuit of a higher value-added economy this
must include manufacturing. In a highly competitive global market
the prosperity of the UK economy is dependent upon companies that
deliver high value to the economy, the company and the employees.
3.2. Government is encouraging UK companies
to "move up the value chain and to reap the benefits of high-skilled,
knowledge intensive manufacturing operations"[213],
while striving for unique value and innovation. However, the attainment
of this goal must not be at the expense of factory closures, job
losses, off shoring, out sourcing abroad, lack of training and
development and ultimately a malaise in UK manufacturing industry.
This is reflected in the DBERR value added scoreboard which identifies
only six UK manufacturing companies in the top 30 for 2007.
3.3. Unite believes the creation
of a higher value-added economy can only be achieved when government
and industry recognise that they must give equal weight to the
needs and voice of workers. This can only be achieved by involving
workers and engaging with them on all aspects of development,
restructuring and training. Government missed an opportunity to
assist this process with the introduction of the Information and
Consultation Regulations which fail to fully reflect the opportunities
intended by the EU Directive. Related to this is the continued
reluctance of government to accept that training should form part
of the statutory collective bargaining issues.
3.4. Unite does not believe
that a flexible workforce as defined and determined by employer
organisations is a necessary ingredient to create a higher value
added economy. Flexibility can only acceptable where workers are
given a voice and a role in any decision making process and where
appropriate employment protection legislation is in place.
4. INVESTMENT
4.1. Government investment
in business, the workforce and the economy itself has never been
more crucial. It is this investment that provides the enlightened
economic environment that allows businesses to flourish, allows
employees to enjoy the benefits of secure jobs and facilitates
the wider economic benefits that this can bring to the UK economy.
4.2. At present, lack of internal finance
is considered to be a significant constraint on investment in
the UK. Twice as many firms in the UK cite this than in Germany
and a third more than in France[214].
This lack of investment in UK manufacturing has been further exacerbated
by the current problems in the global credit markets.
4.3. Globally the UK is ranked
second only to the USA for attracting Foreign Direct Investment
(FDI) and leads the EU. There are also significant results from
the high growth economies of China—15.4% growth, India—44.4%
growth and the Russian Federation—94.6% growth[215].
The UK FDI figure has been achieved in part through the current
UK economic environment which offers economic stability, low regulation
and a flexible workforce. However, Unite believes there are alternative
ways of achieving a higher value-added economy, by adopting the
other social economic models. For example in Finland it is acknowledged
that there must be flexible labour practices but these must be
negotiated with all stakeholders including trade unions and must
not exploit workers or compromise the foundations of the Nordic
model[216].
4.4. Government has a clear
role in stimulating UK investment performance that does not exploit
workers and does not force companies to off-shore. Greater and
more effective use of modern management techniques in conjunction
with greater employee involvement would help to unlock the higher
levels of productivity and profitability that are required to
finance and encourage increased investment. Investment by business
in improving skills, training, innovation and research and development
would also reap unique rewards. As part of this process Unite
believes government must now recognise the need to introduce a
statutory training levy for employers who have failed to invest
in training and skills. The current voluntary agreement is clearly
not working.
4.5. Unite acknowledges that
government is taking seriously the importance of research and
development, with £1.8 billion of financial support, via
R&D Tax Credits being paid out to over 22,000 companies[217],
19,000 of which were small and medium sized enterprises. The union
also welcomes the £1 billion committed to fund business innovation
in the 2007 Comprehensive Spending Review. However, the UK still
invests less than other competing countries in research and development
and lacks the ability to maximise the translation of research
and development into marketable products.
5. SKILLS
AND TRAINING
5.1. Unite believes it is
the education, training and skills agenda where government needs
to act to create the higher value economy. The current level of
investment in the training and skills sector is unprecedented.
However, Unite is concerned that investment is not focussed in
the most strategic way to achieve the desired outcome for UK business
and the UK economy. Without a highly skilled workforce, UK manufacturing
industry will continue its drift to other countries, with the
loss of intellectual property, alongside job losses, being potentially
the most significant problem facing UK manufacturing into the
future.
5.2. Unite believes that a key economic
challenge facing the UK in the next decade is a failure to grow
productivity at a fast enough rate in comparison with EU and global
competitors. A compelling feature of low productivity in the UK
is a significant skills gap with our global competitors. The UK
is the fifth largest economy in the world but only 13th in the
global competitiveness league and only 18th in terms of GDP per
head[218].
5.3. Unite believes one of
the problems adding to the low skills culture is the large number
of mergers and acquisitions that happen in the UK. So far this
year, there have been 112 mergers and acquisitions by foreign
companies at a value of £12.6 billion[219].
There is a view that this level of economic activity can have
a detrimental effect on innovation and the training and development
of the workforce within the companies that are taken over. The
company focus is usually on restructuring and profit. Unite believes
the unprecedented level of mergers and acquisitions also contributes
to the level of poor management skills in UK companies. In the
present global, knowledge driven economy, a skilled workforce
can represent a distinct competitive advantage. However, this
advantage is only of benefit if there is a highly skilled and
highly motivated management structure within a company.
5.4. There is a further consequence
of failure to adequately invest in skills development, seen most
vividly in the construction sector, whereby employers will buy
skills off the shelf through migrant labour, a factor which adds
to the casualisation of labour and is unsustainable in the medium
to long term.
5.5. Training and development
is crucial for the effective management of human capital. Companies
that under invest in skills development are also likely to ignore
training and investment in management skills. Unite believes that
investment in leadership skills would lead to improved staff management
and would lead to a significant economic return for manufacturing
companies. For example, in a company like Toyota, management have
the ability to mobilize the intelligence of ordinary workers,
facilitating the opportunity for the company to innovate and engage
workers[220].
5.6. Research has shown that
UK companies lag behind their German and Norwegian counterparts
when it comes to creating a progressive development ethos for
managers[221].
They also have significant ground to make up in convincing line
managers to take management development seriously. The research
also shows that simply having the policies and appraisal systems
in place did not guarantee that superior performance effects would
be achieved[222].
At present government policy has no provision for the implementation
of best practice in the strategic training of management.
6. INTERNATIONAL
COMPARISONS
6.1. The increasingly global
market place means that economies that are moving up the value-added
chain are at a comparative advantage over those of highly developed
countries. They have the benefit of cheap labour combined with
an abundance of skilled workers which, when taken together with
an unprecedented level of technological change could sound the
death toll for manufacturing in the West. UK government is in
a unique position to assist and support UK companies and enterprises
in breaking through these external markets and enabling them to
export goods and services abroad.
6.2. By advocating the "national
champions" of manufacturing industry in the UK, government
can support manufacturing as a sector. Toyota has already been
mentioned, Rolls Royce, BAE Systems and Shire are other companies
that employ high performance workplace practices and reap the
benefits with high levels of productivity and a highly skilled
workforce. They have also had significant increases in their annual
R&D growth in 2006[223].
While companies such as Astra-Zeneca and Unilever[224]
currently show a decline in investment in R&D as a result
of being in a re-structuring position leading to substantial job
losses.
6.3. The role of UK Trade
and Industry (UKTI) cannot be expressed strongly enough. This
is the mechanism that UK companies use to assist them to export.
UKTI is doing an exemplary job of encouraging FDI but this is
only one side of the market and Unite believes UKTI holds the
key to the expansion of exports for UK manufacturing companies
and the sustainability of the UK manufacturing sector. "British
jobs for British workers"[225]
is a misnomer without the commitment and investment by government
into UK manufacturing industry.
7. INNOVATION
7.1. Government has committed
itself to an increase of public investment in the science base
of 2.2% over 2007-8 to £18 billion[226].
However, Unite is concerned that this will not address the serious
issue of the UK being fifth from bottom in a report showing the
collaboration of higher education institutions with UK companies[227].
7.2. Government must invest in the UK
higher education system and in particular encourage UK higher
education institutions to forge links with UK companies. This
will ensure that any research and development or innovation will
be kept in the UK and intellectual property will be protected.
Unite notes the £150 million funding to the Higher Education
Innovation Fund (HEIF)[228]
to strengthen links between business and academia and bring research
to the market, but is concerned this figure is not nearly enough
to provide for the level of increased innovation that is needed
by the UK economy.
7.3. Unite believes government
offers a broad definition of what elements constitute innovation.
However, there are significant omissions. These include:
7.3.1. employee engagement in the
decision making process,
7.3.2. allowing the workers in a company
to become involved, and
7.3.3. increased understanding about
what the company objectives are and what the company is achieving.
8. FIVE
KEY ISSUES
8.1. The importance of the
manufacturing sector cannot be underestimated when creating a
higher value-added economy. Government needs to re-visit the UK
manufacturing strategy, consulting and engaging all stakeholders
in the process.
8.2. The current economic system in the
UK requires modification to apply social model principles of achieving
economic growth balanced with social benefits and worker participation
and consultation.
8.3. Government needs to further
encourage companies to invest in R&D and innovation. This
could be achieved by increasing funding for the R&D Tax Credits
system.
8.4. Unite believes government
needs to offer a strategic and pragmatic skills and training agenda.
This should start in early education and run right through the
whole education system. The current system is clearly not working
and will exacerbate the current problems with skills shortages
and skills gaps. Business must be compelled to invest in the training
and development of their workforce. Voluntary agreements do not
work. Government must introduce a compulsory training levy.
8.5. Government needs to increase
its investment in Science and Technology, research and development,
encouraging UK companies to develop marketable products and services.
Unite believes £150 million is not nearly enough to foster
positive links between higher education and business. This is
a crucial issue for R&D and innovation.
November 2007
212 Office for National Statistics-UK snapshot. Back
213
Government Manufacturing Strategy Review July 2004, page 12. Back
214
EEF-Catching up with the Continent, Final Report on EU and
UK manufacturing productivity, page 4. June 2004. Back
215
UNCTAD Investment Brief 2007-Table 1. Back
216
Globalisation and the European Economic and Social Model-Discussion
paper for Parliament of Finland. Back
217
HM Revenue & Customs-Research & Development Tax Credits Back
218
OECD Employment Outlook 2007. Back
219
National Statistics -Mergers and Acquisitions involving UK
Companies-4 September 2007. Back
220
Innovative Management-A conversation with Gary Hamel www.mckinseyquarterly.com Back
221
Skills and Economic Performance, Derek L Bosworth, Chapter
4 Management Strategy & Performance, page 251. Back
222
ibid Back
223
DTI-The R&D Scoreboard 2006. Top 800 UK & 1250
Global Companies by R&D Investment. Volume 1, page 99. Back
224
ibid Back
225
Gordon Brown speech-TUC Conference, Brighton-12th September 2007. Back
226
2007 Pre-Budget Report and Comprehensive Spending Review,
DIUS, page 213. Back
227
OECD Science, Technology and Industry scoreboard 2007. Back
228
op cit Back
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