Examination of Witnesses (Questions 340
- 359)
WEDNESDAY 21 MAY 2008
MR CHRIS
ALLAN, MS
LEE HOPLEY
AND MR
IAIN COUCHER
Q340 Chairman: We welcome our second
panel of experts this morning, Chris Allam, the Project Director
of SUAV, BAE Systems, Ms Lee Hopley, the Senior Economist of the
Engineering Employers Federation, and Iain Coucher, the Chief
Executive of Network Rail. Welcome to you all. We are delighted
to see you this morning. I wonder if I could start with you, Lee.
We have heard some of the strengths and weaknesses outlined there
of the UK engineering industry. How would you paint the picture
of strengths and weaknesses?
Ms Hopley: Of the industry as
a whole?
Q341 Chairman: Yes.
Ms Hopley: I think there has probably
been quite a shift over the last decade in terms of its strengths
and weaknesses. Certainly engineering is a lot leaner, it is a
lot more efficient and productivity performance has been pretty
good over the last ten years, certainly relative to the economy
as a whole. I think in more recent times it has proved to be fairly
resilient in the face of the economic challenges that we are facing
at the moment. The outlook still remains fairly good for the sector
as a whole. It certainly started exploiting faster growing emerging
markets in terms of its export base a lot more. Some growth rates
to emerging markets in some engineering sectors have been quite
staggering over the last five or six years.
Q342 Chairman: Give us an example?
Ms Hopley: Of an industry?
Q343 Chairman: Of a staggering increase.
Ms Hopley: In the electrical and
optical sector, growth rates of three to four hundred per cent
in places like Russia and India over the last five or six years;
that is pretty impressive relative to manufacturing as a whole
and certainly the whole economy. I think, in terms of some of
the weaknesses, it perhaps falls down to the skills and innovation
debate that you were having with the previous panel. I am sure
we will pick up some of these issues in more detail, but on the
innovation side, it seems that companies are quite good at coming
up with new ideas but getting them to market and the commercialisation
side of things is perhaps something of a weakness, and I think
that comes back to some of the skills problems that the sector
has been facing more recently.
Q344 Chairman: Okay. Very briefly,
Iain, strengths and weaknesses as you see it from an industrial
point of view?
Mr Coucher: On the engineering
side, I think we do a pretty good job. I think this country undersells
the value that engineers bring to society; there is a perception
that it is the dirty end of the business; but when we look around
some of the things that we do in Network Rail and at other colleagues,
what we achieve is fantastic. The depth and breadth of our skill-base
is unsung really, and so I would say from our perspective the
cup is half full rather than half empty.
Q345 Chairman: Are we too keen to
concentrate on the weaknesses?
Mr Coucher: I think so, yes. I
think we really do. We run ourselves down, we undervalue the contribution,
as I said before.
Q346 Chairman: Is that not your fault?
Mr Coucher: No, it is not our
fault.
Q347 Chairman: In terms of your own
industry, what is the big tail? What are the things we should
be putting in our report to say Network Rail gave us an example
of world leading engineers?
Mr Coucher: Let us give you some
examples of stuff that we do. Unfortunately, from Network Rail's
perspective, our measure of success is complete invisibility,
so when we are successful you do not see what we do but—
Q348 Dr Gibson: Like your trains
in Norwich!
Mr Coucher: I think that is being
slightly harsh as well. Every night when people go to bed, even
in Norwich and Harrogate, we go out on the railways and have next
to no time to repair and maintain a railway which is built by
Victorians for a different age and it is hammered. When we come
to do some of the infrastructure that work we do, we do incredible
things in incredibly short periods of time, and, sadly, when it
overruns, as it does from time to time, people see that side;
but if you were to go out and see what our engineers do in terms
of work, we do some 5,000 projects a year, four billion pounds
of capital investment on the railway, and I think we are very,
very good at doing that.
Q349 Chairman: All right. Chris?
Mr Allam: Our industry, in terms
of defence and aerospace, definitely leads the world at the moment
in terms of engineering.
Q350 Chairman: We lead the world.
Mr Allam: We lead the world. We
are as strong as anybody else in that position, and our intent
is to stay there. What we are looking at at the moment is: what
do we do that facing a globalising economy, facing some demographic
changes that mean our supply chain of engineers is becoming more
fragile and facing a lot of competition across the world effectively
moving into the same markets that we run? We believe we are very
strong at the moment. What we see coming is a threat. I completely
echo Iain's point that we completely undersell that. One of the
reasons we do struggle in terms of the supply chain is engineers
are not respected in the same way as, say, a doctor or a lawyer.
Q351 Chairman: Whose fault is that,
Chris?
Mr Allam: To say "society"
is a very weak answer, but, in reality, I think it is the way
our country works. We were saying before what countries do you
look at that are better? If you look at France, and I spent six
months travelling around Europe working with them being trained,
but if you look at the way an engineer is respected there, it
is different. I would say the same in Germany as well. The level
of respect they get is different. I am not sure they are any better
than we are. I have worked 20 years as an engineer. I do not see
that the Germans and the French are any better at engineering
than we are in defence and aerospace, but I do see they are respected
in a different kind of way. I think that must have an impact in
terms of the way people are attracted to engineering generally,
not just defence and aerospace but generally, when they are 12
to 14 and thinking about what do they do, if they see the respect
you get being an engineer that would lead them more towards staying
with that as a profession.
Q352 Chairman: You are a company
that clearly competes on a global basis. You could not exist purely
within the UK. It is important that you hit those export markets.
Do you feel that you are competitive because of your engineering
skills and strengths, and who else in the world is really pressing
you, your biggest competitors, in engineering terms?
Mr Allam: To take the second part
of that, engineering is fundamental to our success. The absolute
bedrock of what we do is associated with engineering. Once you
broaden that to effective, complex engineering projects, and fundamentally,
although a lot of our business is around working those complex
projects, which is about engineering but also the management of
engineering and the project management around it, in terms of
global scale, there are a number of very big companies, predominantly
in the US who are competitors in terms of where we stand now,
but there are also strong, emerging markets.
Q353 Chairman: China?
Mr Allam: Like China, for example.
Some of those markets we are watching in terms of the way that
will affect the global economics. Defence is a slightly unusual
business. It is not a completely open market. We have a strong
alliance in the UK on the defence sector. So, while we are a global
company, we also operate very strongly in our home areas. The
UK is a particularly strong area we operate in, and one of the
things we are looking for as part of this is lining up that supply
and demand; so there is a big, long chain between the supply side
of getting trained engineers in and the demand side of effectively
the defence strategy of what do the Armed Forces want out of us.
Q354 Chairman: Iain, I am in France
next week and I am going on the Eurostar through to Paris; and
I look at the French railway system and I know if I get on a train
it will arrive on time, the engineering seems to be absolutely
out of his world. Why are we not in that ball park, or are we?
Mr Coucher: Once again, we do
undersell ourselves. If you want to get off your shiny TGV train
as it speeds through the French countryside and get on to a rural
French railway, you will find an appalling service.
Q355 Chairman: I would not in Switzerland,
though, would I?
Mr Coucher: To be fair, Switzerland
is the size of Kent. We run more trains in Kent.
Q356 Chairman: There is a lot of
snow and leaves there though?
Mr Coucher: It is a very simple
railway. It is beautifully timed, I would never criticise it,
but if you look at the size, complexity and scale of what we do
in the UK, we run more trains in the UK than in Germany. Our railways
are better performing than the French railways. Unfortunately,
the British perception of French railways is driven entirely by
the TGV, a railway which is dedicated to high speed. It does not
share a track with any other railway, it is beautifully timed,
and I wish we could do the same here. Whether we could justify
that in the UK, given the size and demographics of the UK, I do
not know, but we do run a service which delivers very high levels
of punctuality. Yesterday, for example, 94 per cent of trains
ran on time. We like to see the down side in this country, but
I think that we do compete very favourably and if you come and
see the number of exchange visits between France and Germany and
the Japanese, who come to see what we do in the UK, you may well
be surprised just how highly regarded we are round the world.
Q357 Chairman: Lee, one of the questions
I asked the earlier panel is this business of preparing engineers
for tomorrow's world rather than today's world. Do you feel that
we are taking that agenda seriously? Do your employers think that?
They have to look ahead, do they not, as well as provide today's
workforce?
Ms Hopley: Sure. We have recently
carried out a survey of our members on expectations of skill demand
in the medium term, and there is definitely a change. Obviously
technical and practical skills that the universities and colleges
are delivering will continue to be important, but if you look
at the kind of activities that companies are increasingly becoming
engaged in, things like design, project management skills are
going to become increasingly important. The question is how are
those delivered. I think the responsibilities of business and
higher education, as was said by the previous panel, is a complex
one. Perhaps what BAE Systems demands of the higher education
system and what they want is perhaps not quite the same as what
a small or medium sized company expects. There is going to be
the need for greater flexibility. The industry is just becoming
more fragmented in the UK, there are fewer really big players
and more small and medium-sized companies. There is more work
to be done in terms of how you develop that responsiveness from
both parties.
Q358 Chairman: That seems to be the
big challenge. We hear that time and time again that there are
few very, very large companies, but a lot of those large companies
are actually dependent on SMEs to do a lot of their subcontracting
work or some of their very highly specialised work. I just wonder
whether you feel that the Government has got its agenda right
in terms of actually supporting those SMEs in terms of engineering
to actually deliver the skills, the innovation, the project management
for tomorrow's world?
Ms Hopley: I think there has been
a lot going on on the skills and innovation agenda for the last
couple of years. We have had the Leitch Review, the Innovation
White Paper and the Enterprise White Paper.
Q359 Chairman: Is anything happening?
We are delighted to have all those papers, but is anything going
to happen?
Ms Hopley: I will have to read
them. There are a lot of positive initiatives in the pipeline.
A number of them were mentioned on the previous panel. The increase
in KTPs, the introduction of mini KTPs, particularly for small
companies, the proposal for innovation vouchers which is perhaps
a really good idea for getting small companies on the first rung
of the ladder with that relationship with research institutions.
It is in the pipeline, but, yes, there is a need for implementation
and delivery.
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