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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC 50-i House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE INNOVATION, UNIVERSITIES, SCIENCE AND SKILLS COMMITTEE
PETER FIELDER, BOB RICHARD PAMENTER, IAN MIDGLEY and RICHARD ARCHER Evidence heard in Public Questions 415 - 520
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Innovation, Universities, Science and Skills Committee on Members present Mr Phil Willis, in the Chair Mr Tim Boswell Mr Ian Cawsey Dr Ian Gibson Dr Evan Harris Dr Brian Iddon Ian Stewart Mr Rob Wilson ________________
Examination of Witnesses Witnesses: Peter
Fielder, Managing Director, Performance Excellence, BAE; Bob Dover, Former Chairman and Q415 Chairman: Could I first of all welcome everyone to this the first meeting of the Innovation, Universities, Science and Skills Select Committee for the new year 2009 and thank very much indeed our first three witnesses this morning to our engineering inquiry. I particularly welcome you, Bob Dover, the Former Chairman and CEO of Jaguar Land Rover and apologise to you for putting off your session before Christmas at such short notice. Welcome to Peter Fielder, the Managing Director of Performance Excellence at BAE Systems, welcome to you Peter, and Nick Worrall, the UK Human Resources Director for the National Grid, a very warm welcome to you as well, Nick. We began this engineering inquiry over a year ago now at a time when the climate was very, very different to what it is today. Perhaps our inquiry into the state of British engineering and recommendations for the future are more important now than they were a year ago because we are now starting to see the real need to have an economy that is strongly based on engineering and manufacturing and making things. That is a personal view and not a view of the Committee. I wonder if I could start with you, Bob, you are representative of the UK engineering industry, all of you have worked at the very, very top level with major companies; what do you see is the biggest cross-sector engineering strength in the UK? Where are our strengths there? Mr Dover: I think the
cross-sectoral one primarily is in academia, particularly with the umbrella
organisations such as the Royal Academy of Engineering where one has access to
a wide variety of expert opinion with people who are practitioners and
academics working together. I think that
is an immense strength that the Q416 Chairman: Do you think that that permeates through into the industry itself? Mr Dover: No because we are in cut-throat competition with each other. We are all wanting to add value but also to add value for our shareholders as well, so the R&D that is done by business does not quite engage with the universities in a way that I think could be possible. Q417 Chairman: Nick, what do you think is the greatest cross-sector engineering strength? Mr Worrall: I agree with Bob - across academia. Certainly within the National Grid we have some great contacts with the universities that we have forged over many years now, and that kind of link has proved to be extremely fruitful for both sides, both for our company and for the universities as well. Certainly we aim to use that as much as we can. To Bob's point, it is extremely competitive. There are fewer engineering graduates coming through and it is extremely competitive to get those in, so we do our utmost to ensure that our proposition is of real value to newly qualified graduates. Q418 Chairman: Peter, have you any comment on this area? Mr Fielder: I endorse
both sets of comments. If we were just
thinking on an international scale, I think there is certainly some evidence
that we do engineer some very cost-competitive products from the Q419 Chairman: So what is our biggest weakness then? Mr Fielder: My guess would be that we are probably still a little bit stove-piped in our approach. We tend to focus a little bit on individual engineering disciplines, for example mechanical engineering, whereas I think if you take it in the context of how we create competitive product designs, then we do not do that as a single discipline. They come out of a multitude of disciplines in the way that we engineer those products. I think I would expand the point to say that we have started to use our engineering disciplines now in quite an advanced sense in terms of not just engineering designs for product performance but engineering design in a service orientation context. I think some of the pressures that we come under, for example at BAE Systems, examples would be not just about engineering for the technical product performance but engineering an optimised through-life cost solution as well, which brings another dimension to the integrated nature of the engineering disciplines that are deployed. Q420 Chairman: Bob, would you accept that a silo approach to engineering is a weakness? Mr Dover: I am not sure. I think that it can be overcome in many formal and informal ways. The weakness, as I see it, in answer to your question is not so much in the engineering or technology, it is in their application. The regulatory infrastructure that we work under is very unhelpful compared to other regimes in which I have worked, particularly things like planning permission. I think that is fairly well-known. Big businesses can cope with the amount of regulation but for small businesses it is a very heavy burden to meet the spirit and detail and letter of the regulations which fall on you from a variety of sources. That is a big inhibiter to setting up and running small businesses which have got the ability to grow quickly. Q421 Chairman: Nick, there is a public perception that British manufacturing in particular is mortally wounded; those days are gone; we are no longer manufacturing anything. Do you think that is a fair view? Are we finished as a manufacturing nation? Mr Worrall: Absolutely
not, I do not think it is fair at all but I absolutely agree that it is the
perception out there. I think we have
a fundamental issue about the branding of engineering in the Q422 Chairman: If there is this perception that manufacturing is mortally wounded and there is that strong perception that we are not a manufacturing nation any more, what do we need to do, given the current economic climate, to actually put manufacturing up there and engineering, which is at the heart of manufacturing, up there in bright lights to start to regain the territory which of course was strongly Britain's in the past? Mr Dover: It is a great question and I do not think we have got time enough to answer it. All you can say, to support Nick, is that if manufacturing had a PR consultant you would dismiss them for incompetence. We do not have a good track record and we do not salute our heroes - the great designers in industry, the great project managers in industry - we do not recognise them in any way at all. The institutions do their bit but it is a big and complex question. I think as manufacturing has moved to become internationally competitive and moved from traditional smokestack industries into the more exciting, new, high added value, high technology, high intellectual input industries, that will come along. How you force it and increase visibility I think is quite a difficult question. I am not sure I am competent to answer it. Q423 Chairman: Are you competent to answer it, Peter? Mr Fielder: Not in an absolute sense, no. The only additional contribution I would make is to say I think focusing on some of the successful things that we have done would probably help. We do have a tendency to see a coverage of the things that do not go as well as they might. In today's environment, with the scale and complexity of the many things that we are dealing with now, in an engineering sense, given that we are solving engineering problems, from time to time things will not go as well as they were planned. Q424 Chairman: Would you agree, Peter, given we are in a recession at the moment, that engineering is probably more vital to Britain than it has been at any time in the last 50 years and what we are trying as a Committee to get from this report in terms of recommendations is a) what are the effects on engineering of this recession and b) what in fact should we be recommending to perhaps try and help? Mr Fielder: One, do I agree it is very, very important? Absolutely, yes. What should we be doing to try and help? I guess one has to look then at what are the potential implications of the economic situation and outlook. Certainly viewed through, if you like, a private sector perspective, I think the sort of implications of the economic outlook are that industrial organisations will be very careful with what amounts to their discretionary spend, so things that you do not necessarily have to do to generate the revenues of today to support annual accounts and those sort of things are the things that are potentially at risk, for example investment in development of people. I do not think companies will stop doing them. Certainly we do not stop doing them, but will we be very careful about those investments? I would imagine so, yes. Q425 Chairman: Bob, you have come from the business of Jaguar Land Rover and clearly they are facing very, very big difficulties at the moment, but in this economic downturn what are the implications for engineering and manufacturing potentially? Mr Dover: Chairman: We are going to come back to that because it is an issue that we want to explore. Ian Cawsey? Q426 Mr Cawsey: As we have been doing this report, I think one of the things that we have all been struck by is the sheer quantity of organisations and institutions that are around engineering - the sector skills councils, national skills academies, charities to promote engineering skills and engineering institutions. Do you think it is too complicated and that what we would benefit from is a much more simple, cohesive and coherent structure? Mr Dover: Yes, that is clearly true and particularly if you are a small business accessing assistance from government is extremely confusing. It is a formidable task and normally after the first ten phone calls you have lost the will to live or the will to expend what little incremental resource you have in trying to do it, and the result of that is a low take-up for many of these extremely well-meaning schemes. Often the best contacts are informal ones at a local level and they work very well. It is confusing for small companies; it is confusing for big companies in terms of how to access assistance, whether that is financial, technical or academic input. I think it is one of the biggest problems that faces us in doing the right thing. Q427 Mr Cawsey: But is it not really for the sector itself to try and become more rationally organised rather than this great plethora of institutions and organisations? We took evidence from a witness earlier who said, "Yes, we would not do this now but what can you do to change it?" Is that just a defeatist approach to it all? Mr Dover: I think the
institutions have to do what they do best.
The umbrella organisations such as the Mr Worrall: I would absolutely support Bob's point. The plethora of organisations that submitted evidence to this Committee, the sheer number of institutes and sector skills councils and so on and so forth which contributed merely support Bob's view. I think that can lead to silo-ed behaviour, extenuating the issue really, to say if there are multiple sectors involved then it almost devalues engineering as a whole, and to the Chairman's introductory comments, it devalues it and plays it down in overall importance for the UK, and we are all advocates of engineering being absolutely there at the top. We should think as an industry about some co-ordinated approach in this field in order to co-ordinate our activity better and build on the PR issue that Bob mentioned earlier. Mr Fielder: I think there is an opportunity there and it does reflect on the point I made before about maybe being a little bit stove-piped. If you think about an individual engineering discipline, it seems to me a perfectly valid professional thing to do to progress with the best practices, for example in a mechanical or a civil engineering context, but how those are co-ordinated and dovetailed with other engineering disciplines which are part of the act of engineering and outcome is quite an important issue. Q428 Mr Cawsey: How does the UK compare to other countries around the world? Is there a good model that you have seen, in your experience, of international work that you think we ought to be looking at? Mr Fielder: I think that Q429 Dr Gibson: It is said that historically when Finland had a recession they turned to their strengths in engineering to get them out of it and were successful. Is that within your ken? Is that true? There are several reports indicating the kind of activities for getting out of it. Is Finland a good example in terms of how it has organised engineering? Mr Fielder: I do not
think I am competent to comment on Mr Cawsey: No Finnish experts today? Q430 Dr Gibson: You should know internationally really, should you not, that engineering has a role to play in economic situations? You are talking about it in reverse in Britain but how about the positive side of it where it does help? Mr Dover: If you look at the Finnish experience, and I have to say that I am not an expert either --- Q431 Dr Gibson: --- Neither am I. Mr Dover: --- What they have done is focused on the winners and instead of levelling out funds and grants and expertise, they have focused very much not on peer review but on saying, "This is the lead industry for us; this is the one that we want to go for," and I think picking winners is a big part of what other countries do. Q432 Mr Cawsey: And we do not do? Mr Dover: You have had some evidence of those areas earlier on. Mr Worrall: My perception
would be that the status of an engineer for example in Q433 Mr Cawsey: That is a theme we have heard before. Peter mentioned the chartering system for engineers which I suppose is about status, but in this country is it well-regulated, do you think it is understood by the industry, the public and indeed internationally? Mr Fielder: Certainly all
the procedures are regulated. Is it
recognised in this country perhaps the way it is abroad, certainly mainland Q434 Mr Cawsey: Sure. Bob? Mr Dover: I do not
quite agree with that. I think the
chartered engineering qualification is well-recognised in the profession, in
the Mr Worrall: Certainly we recognise chartered engineering and set great store by it. I absolutely agree with Bob that us recognising it in an engineering company potentially does not extend outside of engineering and the sector itself which is the issue. Q435 Mr Cawsey: One thing I am particularly interested in is the next generation of engineers and how you get young people into it, for all these sorts of reasons, that people do not see it as a sexy industry and all the rest, but are you satisfied that our graduates are being taught the right things? Is there a requirement to specialise more at university or should they be more generalist with perhaps some other skills added in, particularly in management training and that kind of thing? How do you see future training of the next generation of engineers? Mr Dover: I think, if I may, you have answered your own question. Being a graduate is just the first step in a life of lifetime learning. Increasingly, and certainly at Jaguar Land Rover, we absolutely encouraged every single employee at every level to engage in some sort of further education and further training every year of their employment. Why did we do this? It was enlightened self-interest because the world is changing so quickly, whether that is by management process, by material science, by new technology, by reduction paradigm shifts in the cost of applying technology, and having acquired our graduates, we absolutely had to make sure that they were permitted and encouraged and enthused to further both their formal and informal learning in a number of different ways. We have moved from a situation 30 years ago where you had your degree and that was it to a situation where everyone in manufacturing is in that process of lifetime learning. It is absolutely and fundamentally essential. Mr Fielder: I agree that it is a very, very important issue. Just speaking through my own company's eyes, I think the pipeline of people being developed into senior engineering positions is a hugely important issue for two reasons. Number one: certainly in our organisation it is a very important feeder population for other activities. For example, if you take our programme management communities (and a very large part of our business is associated with running very large complex programmes) probably 70 per cent of the people doing those things have evolved through an engineering career into those positions. Maybe that is not surprising for a company that manages large engineering programmes. Also we have people who evolve from within engineering, which I think, arguably, is quite a difficult thing to do; the education system, maths, science, and what you then have to do is not easy. Some of those people do evolve into other careers, for example in the commercial areas and in HR and so on, and I think from that perspective it is very important. I think then within the specific discipline of engineering that pipeline again is very important to that because it is a very responsible job, it is a role where experience is important as well as the formal part of education. It is responsible in the sense that engineers do sign certificates associated with conformance and safety, and within that role they do exercise judgment. What that means in terms of the demographics is that you can see if you look at the age profile of people evolving through that pipeline and career structure in BAE Systems, we do need to ensure that there is sufficient feeding at the front of the pipeline to service the demands over time. That is not a short-term issue; that is a long-term investment issue in the lifelong learning of those people. Q436 Mr Cawsey: Coming to you Nick, if what we are saying is that university is really only the start of a long journey where you go to continue to develop and move, does that not therefore point to the graduate phase being of a generalist nature because there is not much point in doing anything else because it is all going to change as they move into industry anyway? Mr Worrall: We will need on an on-going basis engineering graduates, but there is also the opportunity for us to look more generally at the STEM subjects coming through rather than pure engineering. I guess we have done that out of necessity with the fewer engineering graduates coming through the system and because we are able to train and give the right kind of training and development on the job once people are in the organisation, so that is a possibility. We have got to think before university as well because I think it is about schools rather more than it is about universities because whilst the teaching is happening in the schools, for example on the maths side, our research shows that teachers have to be absolutely clear about what they are teaching for, what engineering is all about, and how they bring that to life in the classroom. I think that is an area for us to focus on where from an engineering skills perspective, if you are not teaching pure engineering then it is teaching the maths or the technology or the science, to what end, and bringing that to life in schools which I think is critical. Q437 Mr Cawsey: What is the sector doing to actually get into schools? Mr Worrall: We are doing
a lot individually and I guess collectively through the various organisations
that we spoke about earlier. I think
there is an opportunity here for a more concerted approach across the Q438 Mr Boswell: I wondered if I could ask Nick to lead on this one because I think he, like me, had a common humanities background initially. There are one or two prevalent themes which are buzzing around at the moment, which I think are relevant to these kinds of skills sets which are required to deliver excellence, and one is, and it is well-exemplified in the recent article in The Economist on Rolls Royce, which is a company that many of us are familiar with, is the balance between service and manufacturing and how far those are distinct activities or how they should best be integrated. The second question: I was very struck personally when we went to China and Japan by the persistent or frequent references to human factors in terms of perhaps putting together a project and delivering it successfully. The third is perhaps a more familiar issue to Nick and myself, which is how you integrate other areas of expertise, be they HR or specific areas like accountancy, outside the engineering profession into the engineering activity. Looking at those, if they are reasonable areas of discussion, are we good at them or are we in certain cases good, and is it an area to which we could actually add value, particularly if we did it better? Mr Worrall: If I take
your first point of service versus manufacturing or engineering, for a company
of our size I guess there is not just a one-step approach to this. It is a pure engineering company but we have
contact centres for Mr Dover: It is
increasingly hard to draw a distinction between manufacturing and service. I think most people now see it as an holistic
process and certainly in the vehicle industry that is true, it is from
conception to grave, and service is an extremely important part of that,
particularly in safety critical parts of the vehicle. In terms of project delivery, our track
record is mixed on that. In the car
industry that is all we do, we just deliver projects, so there is a certain
amount of expertise there, but also a certain amount of innovation in how that
is organised and how that is managed and how responsibilities are
devolved. Certainly in many projects
teams it would be surprising if you did not have your own budget accountancy
function within the project team as an integral part of the team. Working in teams is something that the Q439 Dr Harris: Mr Dover, you said earlier that you thought R&D tax credits were effective. I was wondering whether, not necessarily now, you could point us to any study that shows that they are cost-effective in doing what they are intended to do, because obviously if companies are spending money on R&D anyway then there is a deadweight cost to R&D tax credits so there is an argument about whether they could be expanded but better focused. I was wondering whether you could explain a bit more about what brings you to the conclusion that they are good and whether maybe later you could identify any information that we can point to that suggests it has been looked at. Mr Dover: I will certainly give some thought to that but certainly for a small business, particularly technology start-up businesses, there is always an issue about funding and there is always an issue about credit. Obviously that is very fundamental and very important today. The longer that you can stretch out that pot of cash which has come from an investor or a bank or whatever, the better, and the R&D tax credit system is a very simple mechanism. It is easy to measure although I think its effect is a bit more difficult to demonstrate. I am not sure there are any academic studies that have looked at that. My evidence is anecdotal and certainly there are one or two of my little businesses that would not be around today if it were not for the provision of that credit. If you think R&D is the right thing to do and people are doing it because they are adding value and hoping to generate wealth by it, for me it is hard to argue against. Q440 Dr Harris: If you accept that it is doing a good job in encouraging increased investment in R&D then even despite that the UK's performance in getting anywhere near its own 2.5 per cent target investment in R&D is disappointing, on the verge of depressing, let alone the Lisbon aspirations of three per cent. Why is it that we are failing, even if you accept that R&D tax credits are a significant help, and falling so far short of that target and doing not as well as many of our competitor countries, despite efforts that I think we would all accept the Government is making to encourage it? Mr Dover: First of all
the Q441 Dr Harris: But 2.5 per cent is 0.5 per cent less than that and that is our own target and we are flatlining at 1.8 or 1.9. Mr Dover: Secondly, I did say that the R&D tax credit applies only to small companies, and my point was if you extended that then you can have a fairly significant effect by people saying, "I can't spend this on research because I am going to go out of business if I do; I am going to spend it on other things I need to do", but to encourage R&D spending in the medium-sized firms is a great possibility using that type of mechanism. That is the point I was making. Q442 Dr Harris: But in a sense that is public subsidy of R&D is it not, so it is a relatively inefficient way of public funding of R&D. I do not say that is not important and useful but how do we encourage, as other countries seem to do, industry's own investment, not subsidised, and not essentially direct from the taxpayer, into R&D? Is there a trick we are missing that other countries are doing? Famously Japan but not only Japan, Germany as well. Mr Dover: I think we have mentioned three things this morning. One is picking winners, and some of the other evidence you have had is about the difficulty and time consumed by peer reviews in order to make sure that we are doing the right things. I am not sure that is necessarily the most effective way of getting money into the grand challenges, as the EPSRC described them and I think that is something to which further thought could be given. Q443 Dr Harris: Can you just explain - and I will bring the others in in a minute on a different question - what you mean by the process of peer review being a barrier or disincentive? Mr Dover: I did not say it was a disincentive. I think it is a very slow way of making sure that money is applied fairly using the physical research councils type of process. I am not sure it is the most effective way of focusing on key programmes, key projects and key challenges. Q444 Dr Harris: So that process is a competitive one where an independent panel, slowly you would say, tests which is the best and funds just the best. The alternative would be what? Mr Dover: It would be a process with stronger leadership which could identify, with advice from engineers, where money was likely to have the biggest impact in manufacturing or in industry or in changing the world. Q445 Dr Harris: Do you all support and do you think your colleagues in your sector support the 2.5 per cent target? Mr Fielder: Yes. Q446 Dr Harris: And how does falling short of it impact? In other words, if we reach 2.5 per cent, would that have a small, medium-sized or large impact on the viability and future prospects of the engineering sector? Is it a critical factor or is it just a useful thing to reach? Mr Fielder: I think as a headline metric it is kind of quite helpful because it must be a step in the right direction. The supplementary question behind the headline metric is how effective is that expenditure or investment being in addressing the issues that could fundamentally help the economy, if you like, so I think certainly from our perspective there is a lot around the range of mechanisms that help to liberate innovation. At the top end, and by way of an example, there is certainly a lot that we have observed in understanding a more comprehensive perspective of the problem, eg through life total cost of ownership on the one hand, that takes you down a path under which you can look into adjusting the boundaries of the established business models. That then gives you a broader range of challenges that the engineering people can look at, so they start to engineer solutions to a slightly broader range of problems. That, in turn, focuses attention on the solution perhaps of particular technology issues. Am I making any sense? Dr Harris: Yes, I am hanging in there! Chairman: Can you hang in very quickly! Q447 Dr Harris: My last question really is about the growing of large companies. We are said to be good at growing small companies, Mr Dover is doing that now, and even medium sized companies, and good at basic research, but it is said that we are not very good at growing those into larger companies, so from the perspective of successful large companies do you accept that is a problem in the UK and from the perspective of large companies what would you say we should be doing better to be more successful there? Mr Worrall: Certainly I
come from a large company and we employ 10,000 in the Q448 Dr Harris: That was an answer to my last but one question. My last question was: how do we better grow small companies, through medium-sized companies into large companies? Do you accept that we are relatively poor at that in this country, Mr Dover, and what could we do better? Mr Dover: No, I do not accept that we are relatively poor at that; I think in a global economy it is just tougher. One can think of examples of small companies growing into larger companies. When I ran Aston Martin it was 400 people and it is now several times bigger than that and the output is several times as much. I cannot say the same about the profit because I have no access to that, but I suspect they are struggling as others are at the moment. I do not accept that that is the case and I do not think there are any organic barriers to growth at all. I think there is a reluctance to perhaps move into new technology and there are barriers there, regulators as we mentioned earlier, but I do not accept the general premise. Mr Fielder: I do not think there is a single answer to the question, to be truthful. If I take our organisation we have grown through a combination of organic and physical growth. Those things depend quite a lot on market conditions. I think certainly in both cases there are issues that surround partnering and how one partners into the supply chain and ultimately whether that is better vertically integrated or is it better managed as a supply chain. It depends on the conditions in a particular market and I think that through that partnering, whether it is vertically integrated or not, there is an issue around how one brokers solutions through the academic institutions, for example, if it is a technology thing, or through small and medium enterprises, and how we can get to the point where that can be leveraged in terms of an opportunity to grow. Dr Iddon: Dr Harris has mentioned this modest 2.5 per cent target of GDP for R&D investment. Do you believe that each of your three organisations are meeting that target or like the rest of British industry are you lagging behind the public sector in contributing to that? Q449 Chairman:: Nick, are you meeting the target? Mr Worrall: I do not know. I will need to come back to you on that specific point. Mr Dover: Q450 Dr Iddon: Peter, are you well towards the target? Mr Fielder: I would need to come back to you with the absolute in terms of a factual figure as against 2.5 and I am happy to do that. What I would say is that over the last probably three to four years it is something that we have paid much more attention to, and we have drawn out from our various business plans the range of investments that we are making, and we look more systematically across the group at that now than we have ever done and we do do calibrations against our industry peer groups, so it is something that is a focus of attention in my organisation. Q451 Dr Iddon: Can I ask each of you what proportion of your budget, if you know, falls in-house for R&D and within the university sector? How do you balance it between yourselves and universities? Mr Fielder: We have a blend of things that we do in-house. We have a range of university partnerships which I think we have covered for you in the written submissions and we also have a range of school initiatives which we do. Can I tell you whether that is one-third/one-third/one-third? Probably not but I can give you a detailed split if that would help. Mr Dover: It is about 12 to 15 per cent externally with the universities and that includes setting up things like the International Automotive Research Centre at Warwick University and our contribution to that, which is designed not only to do pure R&D but to act as a feeder stream for engineers coming out of academia and into industry. Q452 Dr Iddon: Do you have a figure? Mr Worrall: I do not have
a specific figure. The majority is
academic-based and the previous answer I gave around our partnership with the Q453 Dr Iddon: Thank you. Do any of you see any barriers against investing in the universities? Is it difficult or is it fairly easy to engage universities in your R&D work? Mr Worrall: I certainly have not seen any barriers, and universities need funding perhaps more than most institutions, so large organisations coming to them with a potential proposal certainly tend to be listened to. Mr Dover: None whatever. Q454 Dr Iddon: And finally Peter? Mr Fielder: No, I do not see any fundamental barriers. Q455 Dr Iddon: No barriers, that is good to know. We have covered a little of this earlier, but I am putting a more specific question to you now, how do you see Britain ranking in terms of innovation on the international scene? Are we at the top somewhere or are we lagging behind in engineering? Mr Dover: I think you would have to look sector-by-sector. I think each sector is very different. Clearly there are some areas where we are absolutely in a worldwide competitive position, and some of those have been represented by the evidence you have had on plastic electronics, aero engines, aerospace, materials development, and there are some areas where we are clearly lagging, for whatever reason. I think you have to look sector-by-sector. I find it a really difficult question to answer, I am so sorry. Q456 Dr Iddon: That is a sensible answer. Peter? Mr Fielder: From personal
experience in rail transport, telecommunications, and for a large part now
defence, I would observe those sectors have competed pretty effectively
internationally. If I observe contrasts,
if you like, on the defence side between Q457 Dr Iddon: Finally Nick? Mr Worrall: Certainly
from an international perspective we have a regulatory barrier to overcome in
terms of work to move into mainland Dr Iddon: Thank you. Q458 Ian Stewart: Keeping on that international line, do you think that governments in other countries - and you have heard about Japan and China this morning - take engineering more seriously and allow better access to government for engineers? Mr Dover: Yes I do. I think you have already had evidence to look at the US system where there are engineering advisers at the highest level to make sure that the numbers add up before policy is made let alone specific project decisions. Q459 Ian Stewart: That was my next question. Mr Dover: I beg your pardon, I stand corrected. Dr Gibson: Same answer. Q460 Ian Stewart: It stands for each of you the answer to that is yes; is that right? Mr Fielder: I am
reasonably well-equipped to comment on the Q461 Ian Stewart: Coming back to the point that you were just raising about access, Bob, we have had evidence given to this Committee in December that was scathing about the UK Government either not taking engineering advice in policy development or taking it too late at the implementation stage. Have you seen any evidence in the industry of access at the planning stage for engineers? Mr Dover: Personally I have had meetings with the Treasury which have been a complete waste of time. That is probably because --- Q462 Ian Stewart: Why do you not say what you mean! Mr Dover: I obviously presented my case very badly, but it was just ignored, it was a waste of both our time. Q463 Chairman: Is this because they did not understand the engineering case? Mr Dover: You have got to have an intelligent --- Q464 Chairman: Careful! Mr Dover: --- Questioner and you have to ask the right questions, just as you have been doing this morning, let me add straightaway! And you have to have a meeting of the minds. Often an adviser can help in understanding what is important and what questions to ask. If you do not ask the right questions, you can just go completely wrong. One example of that would be generation one biofuels where because no-one asked whether the numbers stood up we went down completely the wrong path. Q465 Ian Stewart: Does that stand for all three of you, by the way? Mr Fielder: I think there is a communication issue and because of the scale and complexity of many things that are done in engineering now, if it is not explained to people who are non-engineers in a way that they can assimilate the issues, at least in their minds, and I am really giving you an input less around the government but around an analogy of what happens in our organisation because engineering folks do have to communicate issues to finance people and HR people and so on, that communication must be effective, and I think part of that is a responsibility on those who are listening but it is also in part a responsibility on those who are presenting. Q466 Ian Stewart: For example, we have heard that Tony Blair met with engineers every couple of months and we hear that Gordon Brown has not met with engineers in the last 18 months. How do you get that access? How would you say that it could be improved? Mr Dover: While he is thinking, I spoke to Tony Blair a couple of times and I had the opportunity to raise what I thought were issues and we talked about infrastructure and even though maybe nothing much happened, it was a great opportunity. You felt a great relief that you were able at least to communicate a point of view, an opportunity which you may not have had through other mechanisms and other committees, and I thought that one-to-one contact was extremely valuable. You can ask him what he feels, he probably will not remember a word of it, but I felt it was helpful. Mr Fielder: I think the key is around how you make the link to the business issue early enough in the life cycle of something. If you took, for example, a major investment programme, it is around understanding the case for change, it is about communication and dialogue at that stage in order that the engineering issues can be articulated early enough in the life cycle. Our experience is that it is not unusual that the engineering capability is brought to bear reasonably late in the proceedings, and that usually means that there are issues about the core assumptions around which planning is delivered and there are issues around what are the risks associated with the particular enterprise. Dr Gibson: But is it a question of "dear Brutus", that it is your fault that you do not get the message over? It is not written in the stars. Everybody who lobbies has problems. You have to find the mechanisms, the devious ways to do it, you have got to get off your butt and actually make it happen. You are no different to the biotechnology industry and other people who have come forward and really pushed themselves very hard and got the ear of government. The next group of panellists will probably tell you how they have done it and they have been successful. Maybe you are too steeped in trying to be engineers as such rather than businesses trying to develop UK plc. Maybe your whole approach is like the beer industry where they are useless as against the whisky industry who get all the concessions because they know how to do it. Q467 Chairman: There speaks a Scot! Mr Dover: A staggering analogy! Q468 Chairman: You are a failure, Bob, so defend yourself. Mr Dover: That is hard to argue with. Of course normally we do not speak to government because we are engineers; we speak because we are large employers, because we are a major part of the community, we are recruiting people on a global basis, we are dealing with other global institutions, because the supply chain, as you are well aware, is global these days. As I said earlier, our PR has not been that great and I am presuming that our lobbying ability is not quite as focused as it should be. Dr Gibson: Is that because you do not work together? Q469 Ian Stewart: Would it help if the Government had a Chief Engineer to co-ordinate cross-departmental policy and development? Mr Dover: Yes, much more important than a Chief Scientist. Mr Worrall: Certainly when for example we opened our new training centre we got David Lammy along to open it and the Minister saw what we were doing in terms of training and development and people coming into the organisation, and it brings to life what we do. Therein lies the fundamental problem as I see it: we hide our light under a bushel too much. Once people see what we do, they recognise a) how important it is and b) that we are good at it, and it is that kind of continuing PR, getting out in the public face and showing what we do out there that we need to do more of, and if we do that it in a concerted, joined-up way then so much the better. Chairman: That is quite a positive note on which to finish this session. I apologise for my colleague accusing you of not being good enough at your job. It is a cross we have to bear! Can I thank Peter Fielder, Bob Dover and Nick Worrall for your evidence this morning. Thank you very much indeed, gentlemen. Witnesses: Richard Pamenter, Vice-President and Head of Engineering,
GlaxoSmithKline; Ian Midgley, Outgoing
Chief Supply Chain Officer, Unilever, and Richard
Archer, Founder of the Technology Partnership and former Chairman: We welcome our second panel this morning - thank you very much indeed, gentlemen, for joining us: Richard Pamenter, the Vice-President and Head of Engineering at GSK; Ian Midgley, the outgoing Chief Supply Chain Officer at Unilever, and Richard Archer, the founder of the Technology Partnership and former CEO of the Automation Partnership Group plc. Welcome to all of you. I assure you we will be very gentle over the next 50 minutes. Dr Gibson: To hell we will! Chairman: We will start with Tim Boswell. Mr Boswell: Chairman, can I begin, I think, properly, by declaring an interest? I am a shareholder in GSK and my wife is a shareholder in Unilever. Having got that out of the way we are now going firmly to that. Dr Gibson: Drawing out the shares at GSK, are they not? Q470 Mr Boswell: I think we had better not go into that now! Everybody in the public has a mindset about engineering firms, representing BAE, Rolls Royce and whoever, and they call them, probably, "proper" engineering firms. By implication, food and pharma, to name but two, are not that. Can you say, really, now important engineering is to your organisations and whether it is publicly understood that that is the case? Mr Archer: Engineering is important to pharma and biotech, absolutely, although it is a science dominated sector - so it is life science dominated, biology dominated and biochemistry dominated - and in the company I built up before I retired we made machinery for drug discovery, drug manufacture and biologics manufacturing, and we exported 80 per cent mostly to in and around New Jersey because it was easier to have a dialogue with an American pharmaceutical engineer than it was with a British pharmaceutical engineer. Partly they valued it more and partly they understood how to do it, and we are talking more likely to appear on the other side of the table ---- Q471 Mr Boswell: Could I interpose straightaway there and ask: was that a regulatory failure or was it just a cultural failure? Mr Archer: It is a cultural issue. It is nothing to do with regulations; that is
not an issue; it was just they understood what you pay for engineering, if you
like, and therefore it was easier to go to Newark, get on a 'plane and sell a
machine out there than it was to go to Stevenage, sadly, but that is what we
discovered, and we went where the money was.
So I think there is a greater awareness in other parts of the world about
the role of engineering in pharma and biotech than historically there has been
in the Mr Midgley: Engineering is important to Unilever in two senses: first of all, we operate a small match of 270 factories around the world, so I guess engineers would have a role in managing those. So I guess that is the first point. The second, and probably less well-understood, point is the pivotal importance of engineering R&D in the consumer product sector. Just to explain a little bit what lies behind that: the consumer properties of a hair product, a skin cream, an ice cream or a spread, at a first approximation, depend on two things: they depend on the formula - the ingredients you put in - but they also depend, crucially, on how you process them. Much of consumer products processing is around emulsion structuring and emulsion formation and, therefore, in consumer products R&D it is often hard to say where the formulator stops and the engineer takes over. It is all part of one story. Q472 Mr Boswell: That would, presumably, include the sub-straight (?) or the carrier product as well? Mr Midgley: Correct. So straightforward engineering and engineering skills, particularly in the R&D area of process chemistry, are extremely important to us. To your question: "Is that well understood," I think, for various reasons, there has been a lull in that understanding. The focus of the consumer products industry has been much more around integrated supply chain leadership than around specialist, technical disciplines (and I can say more about that if you are interested), but there is now a renaissance, driven by all sorts of things: the focus on nutrition, the focus on lower-energy processing and the focus on lower-carbon approaches to the consumer product supply chain. All of that is starting to bring resource shortages. We have been through a period of ---- Q473 Mr Boswell: And cost, presumably. Mr Midgley: Resource shortages and cost pressures. All of that is provoking a rethinking of product design and product supply chains, and that is very engineering intensive. Mr Pamenter: I think the question is: how important is engineering in the pharmaceutical industry? I think you have to take a step back and ask yourself the question: "What is engineering?" I became an engineer because I could see it was the set of capabilities that you used to turn science into realities that do things for people - whether it is filling a bottle of water in a manufacturing plant or getting an absolute drug to a patient. So it is capability based. In the pharmaceutical industry we need a blend. We need (and I do not mean this disrespectfully) basic engineering capability; we need people that can design and build facilities; we need people that can design factories and facilities in which we can install our equipment. However, increasingly, picking up from Ian's comment, you see engineering is all-pervasive in our products. So, some of you may be familiar, we have an asthma treatment which is a dry powder inhaler. We make something like 100 million of these inhalers a year. They are dry powder so they do not use CFCs so they do not release CFCs into the environment, and there are 19 mechanical working parts in each of those devices. That has got to be brought together, and that needs automated plant; it needs people who are prepared to design special plastics that do not fray so plastic does not get into the patient's mouth, and you need people to design the air-stream that is coming out of this small device. That requires science, engineering and fluid dynamic calculations, and we then have to demonstrate that that is going to get into every patient perfectly every time. Q474 Mr Boswell: And that the patient can use it. Mr Pamenter: Exactly - and it is useable for the patient. So it is a very broad spectrum. How important is it? It is fundamental, because engineering translates science into realities. Then you have a separate question "What does each sector need?" - what kind of skills do engineers need to bring to that sector? It always comes back to the basic thing: translate the basic science into an actual reality. Mr Boswell: That is very helpful. Chairman: That is an admirable description, by the way. Thank you very much indeed. Q475 Mr Boswell: Can we go on, then, to what you might call conventional analysis? Richard has given us a taster of it in relation to pharmaceutical engineering already, but looking across the piece in engineering, not just in your own sectors, what do you think the United Kingdom's biggest engineering strengths and weaknesses are? Mr Midgley: The question was the Q476 Mr Boswell: What do you think, UK-wide, across all sectors, are the biggest strengths and weaknesses in engineering? Mr Archer: I think one of the
traditional strengths of the Q477 Mr Boswell: Is it good news in a recession to be improvisers and patchers-up? Mr Archer: Yes, absolutely. I have talked with people about defence
budgets, and I think the Q478 Mr Boswell: Are there any obvious weaknesses, other than the one you have mentioned? Mr Archer: The weakness is, of course, engineers are not paid enough. One of the things that would do a great deal for us is to see a few more rich engineers around the place. That is probably the bigger contribution that James Dyson makes to things than vacuum cleaner science, shall we say. Wanting to be rich and wanting to be an engineer are usually counterproductive things to be. So encouraging people to go into engineering and stay there rather than go and do something else by the time they are 30 is pretty important, I think. Mr Midgley: On the strengths side -
again, I speak just from the Unilever perspective - I think we have got some
absolutely top quality engineers; bright, young engineers. I think they are innovative and I think
(turning to some of the discussion I was listening to in the previous session)
many of them tend to be very business orientated, which is a huge
strength. I guess I have probably walked
round the order of 150 factories in my Unilever career (I have not walked round
all 270 but I have walked round quite a few), but in terms of that elixir of
top performance, I would put the Q479 Mr Boswell: That is on the back of lower resources. This sounds to me like a cultural problem, if I am editing what Richard said, rather than a cash fix. Is that right? Mr Midgley: Yes. I can tell you, without going into the
details, that if you are a senior engineer in Q480 Mr Boswell: Can I just pick you up on that, if it is not an invidious question: attitudes abroad, for example. You have come out of a multinational company which will be taking a view and acquiring a standard across the globe, no doubt. How much are they prepared to engage in this and say: "Isn't it remarkable that in a country which is still a developing country you have these very high standards that, perhaps, we do not do as well either in the UK or even in the US?" Mr Midgley: For example. Q481 Mr Boswell: Do the board engage on that? Mr Midgley: Yes. We had a substantial system, as you might imagine, of performance management. It was to the point of, if you will, manufacturing performance rather than a component contributor; so engineering would have been one and - as you were asking the previous panel - human resources is yet another. There are many components of a successful manufacturing system, but Unilever (and, I suspect, most if not all of our competitors) indulges in a lot of internal and external benchmarking and knows very, very well where the various facilities might sit in terms of various elements of performance, both financial and non-financial. Mr Pamenter: These are just experiences - I have not got data to support them - but my experience of seeing British engineers in practice is that our greatest strength is our ability to be integrative. So if you speak to an English or British discipline engineer, they are more likely to see the whole picture, perhaps, than some of the colleagues I see in other parts of the world. That is purely a personal experience. However, if you were to say: "What is the thing that we are least strong at?" I just do not think we manage to inspire enough; to demonstrate to people what an inspiring thing engineering is and how fundamentally important it is to any society. I think that is an area where we need to do a lot more work. The classic example would be that it is very easy to get young adults to do a forensic science degree; it is much more difficult to get them to do a degree in any kind of engineering. Part of that is because they have a far greater awareness, through television and through society, of what forensic science is than they have an awareness of the fantastic things that engineering does for any society. I think that is the weakness: our inability to inspire people enough. Q482 Chairman: Can I ask you why you think that is? Your rather brilliant analysis of what an engineer is means that everything that young people see in this world - the fantastic things from spaceships through to the whole media world - is all about engineering, and yet a programme on television which is about forensic science seems to be more attractive. How can that be? Mr Pamenter: I think, perhaps, it is the nature of an engineer. I am an engineer by training and discipline; if you give me a problem I want to solve it for you, but I do not want to talk about it with other people and share what we have done - I am far more interested in solving the problem in practice, because, by nature, an engineer wants to fix a problem and we have not got the skills set that helps, for want of a better word, market what we have done. That would be, in my company ---- Mr Boswell: Not since Brunel, perhaps. Dr Gibson: He never appeared on Channel 4! Q483 Mr Boswell: That is a diversion. Can I just ask a final question of the three of you (and you have been very, very helpful in all this), and that is really the role of government. We can assume, I think, even if people do not fully understand engineering, they have at least some handle that you are representing companies who are active in manufacturing. The Government has a new manufacturing strategy, which is to be keyed into the economic challenges and come out fitter. Do you think the Government's strategy will help you do that? Mr Archer: I must admit when I was building companies I did not worry a great deal about what the Government thought about what I was doing, or vice-versa, to be honest. So I did not go for grants and I got my money from customers, which was very strange. Q484 Ian Stewart: In hindsight, was that the right thing to do? Mr Archer: Yes, absolutely. I think that this country relies too much on
growing businesses based on raising quick equity and a quick exit, and actually
my company was employee owned and 85 per cent of the equity was with people I
knew. That is much more like a German
model. Can the Government help? I think some sort of incentive that encouraged
people to stay in engineering. One of
the main frustrations I have is that I lecture part-time some of the better
students in engineering in the UK, and the really good ones are fantastic;
compared to what I looked like when I was 21 they are astonishingly broad in
terms of what they can do. So, of
course, half of them then go and work for management consultancies or finance
houses, and that is a real frustration.
Hopefully, in the current mess, that will be one of the upsides that
will come out of it; that will no longer be a good business to go into. The very best ones do not end up in
engineering, which I suspect is not the case in Mr Midgley: It is interesting you set
your question in the context of the Government's new manufacturing strategy -
and, goodness me, at least two cheers that the Government now has a
manufacturing strategy and the political heat is being turned up on
manufacturing, and good that it is.
However, I would commend the document to you. I have read it in detail, and it is very hard
to recognise the Q485 Dr Gibson: But the head offices are in other countries. Mr Midgley: Be that as it may ---- Q486 Dr Gibson: But that prejudices the political game, does it not? Mr Midgley: It may do, but surely the
relevant fact here is that the largest manufacturing sector in the Mr Pamenter: I think there are two
points. The first question is what can
Government do? The first question is:
what is the industrial vision for the Chairman: The skills issue is something we are interested in. Q487 Dr Gibson: I just wanted to link up what you said. Food being the important manufacturing area, but plant science gets much, much less money for scientists to get stuck into different types of food (I will not mention GM but that is creating problems). Why is that? Why do animal sciences (stem cells, for example) get all the money and plant science does not when manufacturing, as you have rightly pointed out, in the food industry is so important? Mr Midgley: Why is it relatively neglected? It is hard for me to say. Unilever, at a certain level, of course, with
regard to food manufacturing, is, arguably, big enough and ugly enough to look
after itself, and should be, of course.
It is very hard for me to answer your question, but it is clear that
when people think manufacturing, when they think engineering, they are clearly
starting to think BAE, as you were saying in your introduction. As you can tell, my advice to you would be to
make sure that the needs of all the manufacturing sectors are extensively
understood and reviewed. That does not
mean to say that food manufacturing needs a lot of money pouring into it; it
may not, but I think the very least that is required, if one has a strategy, is
that one understands the direction of development, the resource issues and
regulatory issues, and so on, that surround that which are important to their
development - I would have to say, given where I come from, hopefully, food
foremost amongst them. You would not
imagine that the Chairman: You have made that point very well, and it is one that we have noted. Q488 Ian Stewart: Are you suffering skills shortages in each of your respective industries? Are we in the UK doing enough to develop the next generation of engineers? Mr Pamenter: It comes back to the point, if we look at skills: are we slowing our business down because we cannot get the right people? No. Is it easy to get the right people? Equally, no; we have to work hard at it. I think it comes down to what is the blend between traditional, basic engineering forces and then modules or courses that become more oriented to what you see as the likely industries moving into the future. So an example would be, in pharmaceuticals, what is becoming more and more important is understanding the actual delivery mechanisms of getting the product into the patient, whether it is a powder into your lungs or whether it is a specific type of injection. That needs a different engineering skill that has not been around before, which combines particle motanics (?), with fluid flow modelling and with particle rheology. These are all things that engineers can put their brains to and deliver, and we could take a basic engineer and he could acquire those skills, but it would be an awful lot better and easier if we could pick from some universities that were offering those kinds of courses, which comes back to this: how much do you let the market decide what courses are on offer at university and how much you think ought to be an influence for looking at where you see ---- Q489 Ian Stewart: That has actually strayed into my next question, which was going to be whether you prefer generalists that you can turn into specialists or developing more specialists? Perhaps the other two can also comment on that as well. Mr Archer: My experience on this was I never used to sit there wringing my hands saying: "Why can't I just recruit guys I can drop straight into this job with everything there is to know?" That is actually not the educational organisation's problem. What I wanted were guys who were immensely curious about what was going on, with a fire in their belly and a twinkle in their eye, and whether they were called a chemical engineer or a mechanical engineer did not really matter because you could turn them loose on things and they had big brains and off they went. It is that flow of those kind of alpha engineers, if you want to call them something, that is critical, not the kind of cannon fodder for the regular or the routine. The innovation comes from these guys with the spark and the fire, and they can turn from one thing to another very, very quickly. As I say, this idea that you have got to get guys to come in and they have a particular expertise and know exactly what you are looking for. I think that is not what the training agenda should be about - I do not think, certainly, for academia. Mr Midgley: I thought Richard put it very
well there, actually. A couple of
comments from my side. At the graduate
level, no, I think Unilever is able to recruit what it needs, though I must
say, from what I see, recently the number of high-quality applicants from
engineering degree courses has fallen.
That is a fact. At the craft
skills level, if that is still the right label, our experience seems to be that
those things are very regional. We have
a factory in Q490 Dr Gibson: Mustard. Mr Midgley: Indeed. Cutting the mustard. We have another one making ice cream down in Q491 Ian Stewart: Are we preparing those engineers for the future? Mr Midgley: If we come to your question
about specialists, generalists and preparation, I would echo very much what
Richard said. I think we are looking,
clearly, for people of high academic calibre but, also, with that (I thought
his words were excellent) "native curiosity and energy" and so on. When we put people into technical jobs in
Unilever, we cannot expect that there will be some University College London
department of margarine making. So we
expect that we would have to do a certain amount of induction and training, and
so on. I think Richard put it well; you
are looking for the raw material. Of
course, in that way, with graduates, you are also looking immediately for the
leadership potential. You would not go
very far if you did not have some leadership potential as well. Perhaps just edging on one step further (and
there were echoes of this in the previous session), the new career horizon for
engineers in consumer products is the extended supply chain. That has become a phenomenon of certainly the
last ten years and particularly the last five.
I did a little poll in anticipation of perhaps this kind of question. About two-thirds of our supply chain
leadership in the Q492 Mr Wilson: You have both suggested that you need specialist engineers for your business. I just wondered, following on from what Ian said, do you actually, in a sense, put your money where your mouth is? Do you get alongside universities and design the courses alongside them that you really want, so that you can get the graduates you actually want by the input you put into the universities and the money you put up alongside that? Mr Pamenter: I will happily answer. First of all, we need some specialists. I would caution not everyone is going to be the alpha engineer; some are going to be good engineers and they want pointing in the right direction. I am a chemical engineer; 100 years ago there was not such a thing as a chemical engineer because there was no chemical industry. There are now software engineers; there are now computer engineers. These things evolve because science is translated into reality and engineering disciplines arrive. So I can say very clearly that in the pharmaceutical industry, in the areas of devices and new delivery systems, we need engineers with the ability to integrate. You are right, there will be talented people out there who, from a science degree or a pure engineering degree, can figure that out because they are bright and they are enquiring, but there is a distribution of people. There will be other people that we need to do that who perhaps could not have made that mental leap without the structure of a course being put around it. I think in GSK we are very fortunate in being able to get some very good people but we go and do business with other companies in UK plc who also need those resources that we need to work with. So to answer your actual question: could we do more? Probably. Do we have relationships with universities? Yes, for example at the Wolfson Institute on powder flows we do something and I think the question is we will do things based on our individual company need but the thing to think about is: is that the right holistic picture if you are trying to grow the engineering skills and capabilities of the UK? I think we would struggle to do that as a company on our own. Mr Midgley: Unilever has strong links
with quite a few Q493 Ian Stewart: Carrying on with you, in your evidence earlier said that you would place the UK middling, in relation to, say, Brazil, at the forefront of plant and other things. Where do you place the UK in relation to their effectiveness in relation to skills internationally? Mr Midgley: Let me help with the
comparators I can give. In terms of our
industry - and of course you are only getting a one company perspective here,
so you have to aim off for that - certainly in terms of skills I would say in Europe
we would be behind, certainly, Germany and Italy, for example. Maybe that, by the way, is linked to another
point, which is that the input engineering - that is to say the machinery and
equipment engineering, the packing lines and the process plant - almost none of
that is UK-engineered these days.
Regrettably, but it is not. So
the great suppliers to the consumer product industries are companies like
Hamber, Alfa Laval, Corniani and Matzoni (?).
These do not sound like household names in the Q494 Ian Stewart: How can we compete effectively? Mr Archer: At the highest level I think
we are in good shape; the graduates are the best graduates, provided we can
persuade them to take up engineering jobs afterwards. It is further down we are not as well
served. My technician staff, most of
them were 55 and over, and the issue is how we are going to replace them in the
long-term because blue collar skills are not highly regarded. I did some work some years ago with one of
the companies Ian was talking about, which was a German company who make over
half the blister packing machines for the world's pharmaceuticals and they run
a business in central Mr Pamenter: Skills will evolve around successful industries. So if you take the Italian packing machine industry, they make some very good packing machines. Ergo, they will have very good skills to make packing machines. What I cannot give a view on is whether that was something inherent in the way they train their people that gave them those skills or whether it was some innovative, entrepreneurial Italians that set those businesses up and then the skills came to them. You cannot de-couple skills from your industrial vision; I think the two will go together. At the university level you have more influence on what you teach people but, again, unless they can see a vision for how they are going to deploy those engineering skills you are not going to inspire them and maybe they are going to go into finance. Q495 Dr Gibson: Turning to research and development, your industries have got to get the most for the amount that you put into it. How do you decide on the level of research and development you do? Is it just per chance or is there a long-term plan? They are in a similar position, research and development, in that they are the first thing to be cut when there is unemployment. There are always scientists who are on the dole, and so on - and that might happen again, who knows. How do you go about deciding on your investment in research and development? What precipitates the programme? Mr Pamenter: It is a very big question and one outside of my personal remit, as Head of Engineering. What is clear in the pharmaceutical industry is if you do not discover and develop and bring new products to market your business will die. So it is a complicated and important process for us, but I cannot give you a specific answer. Mr Midgley: I can and will plead the humble Operations Leader, to some extent, but I can help you this far: first of all, Unilever, I think, can justifiably claim to have a very consistent approach to investment in R&D; it is not a kind of P&L balancing item - certainly not. I think there is a good reason for that, which is that Unilever is, ultimately, a branded goods company, and branded goods companies survive according to their ability to offer consumers added value and you do not do that without putting substantial resources into product research and development. So the truthful answer is that at its core it is part of the business model. In terms of allocation of resources and the absolute level, I think the process, by and large, is one driven, frankly, by business strategy. So Unilever, in the end - and I am sure most other companies would and should do the same - is always scanning its categories and its geographies looking for consumer trend and growth opportunity, and it places its chips, if you will, on that particular map according to strategy and priority. Mr Archer: We certainly did not start with a government target and work backwards to our own investment. That is not the way you look at these things. Depending on how you drew it, I suspect we spent 25 to 30 per cent of turnover on R&D. Most of the companies were engineers; the manufacturing staff is relatively small because we were making high value goods in which the intellectual content was more important than the lumps of metal it ultimately manifested itself as. We did as much as we could afford, but it was strongly market driven. That was probably the difference with many technology companies. Until we had identified there really were customers out there who wanted this thing we did not do anything. Q496 Dr Gibson: These figures, 25 per cent - I never assume that they are absolute; they are plus or minus, or whatever - but how do you decide the proportion of that that will be done in a university environment or a research environment - pure, as it were - rather than in your own company? Mr Archer: We were rarely doing blue skies research; we were supporting the biotech industry and kind of helping them make things ---- Q497 Dr Gibson: You do not just let them do anything? Mr Archer: No, no, no, but we never assumed that the universities would solve our problems. I am not a great fan of the idea that universities exist to provide cheap R&D labour for manufacturing companies. The advisory boards I sit on for manufacturing skills these days, I spend most of my time stopping them doing dull stuff that is too near-market. That is not what they are there for. So treating them as some cheap resource around the corner that can give you some quick ideas, I think, is not a very good business practice, apart from anything else. So the R&D we did in-house. We worked with the universities but in a more altruistic sense of kind of making sure we got connections with a good source of supply of bright people. Q498 Dr Gibson: Is it a daft question to ask what proportion you put in a university as against your own workplace? Mr Archer: In terms of direct cash it was relatively small. In terms of kind, we invested quite a lot of effort - mentoring people, student projects - that kind of thing. That is different. The other thing was that, basically, most of my executive team were engineers, and a lot of the decisions about: "Should we or should we not do these things?" were just obvious, at least to us - they may not have been obvious to our financial officer, but that was not really important. We just got on and did it. Q499 Dr Gibson: How do you handle the question of risk in these situations: "That's a bit risky; we could waste a lot of money doing that"? Does that come into your conversation? Mr Archer: We were practitioners running as a board of directors running a company. So, arguably, we are more qualified to make the call about risk than anybody else in the organisation. We could look at this thing and say: "Well, we don't know exactly how we're going to do it but we're pretty confident that we've solved 19 similar problems in the past, let's go for it", as opposed to: "It's all dead obvious and all perfectly proven". That is what you find happens if people make those calls. That is what you are paid to do. Q500 Dr Gibson: Ian and Richard, your industries: anything around that - about risks, for example, or proportion to universities? Mr Midgley: If I could just say a bit
about that, I cannot tell you the figures on proportion. If the Committee were interested then,
obviously, Unilever may be prepared to provide those figures. What I can tell you is that we have a number
of partnerships with universities which are flourishing and which government
grants have gone a considerable way towards facilitating. So I was talking about the ultra-high shear
mixing facility which has been installed in Q501 Dr Gibson: The individual themselves --- Mr Midgley: Yes. This makes negotiation of agreements with universities about collaborative work rather more complex. Q502 Dr Gibson: Are these individual agreements with different universities? Mr Midgley: Yes. Q503 Dr Gibson: There is not one standard ---- Mr Midgley: Individuals. Q504 Dr Gibson: Because Cambridge reckon they have got the best. Would you say that? Mr Midgley: I do not know. I could not comment. Q505 Dr Gibson: They always say that! Mr Midgley: They would, wouldn't they? Q506 Dr Gibson: Richard? Mr Pamenter: A very, very brief comment would be that R&D, particularly in the pharmaceutical industry, is all about managing risk. You cannot just put more and more money into R&D and think you will get successful products out at the end; you have to make risk-based decisions on where you put those resources, then, in judging how you are going to be most productive, you are going to run a blend between what you do inside and what you do outside. Chairman: Are you going to put the OSCHR question? Q507 Dr Gibson: I do not know what OSCHR is - except you get one if you are a good actress or actor. What is OSCHR in pharmacy? Mr Archer: The Office for Strategic Co-ordination of Healthcare Research. Q508 Dr Gibson: Does it help? Does it hinder? Mr Archer: I think it is too soon to see its impact. The whole issue of healthcare, which is one of my kind of hobbies these days, is a multidisciplinary issue across government that is a good example of government departments not working well together. I think John Bell's role at OSCHR to try and pull all that together and get a slightly more co-ordinated response is pretty important, speaking both as a patient and as a taxpayer. Q509 Dr Gibson: You have not got a judgment on it yet? Mr Archer: I think it has only existed for a year, or something like that. I am no expert on it, but it was sorely needed, I think, from my perspective. Q510 Dr Harris: Mr Archer, in your evidence in relation to innovation you said (and we touched on this in the last panel): "The quality of engineering research in the UK is hampered by concentration on the peer review process for selection of academic research proposals." You say that it gives "safe" outcomes but that it "... mitigates against exploring the truly innovative idea, particularly where it is cross-disciplinary." What would you put in its place and how would you ensure value for money so that you are not just funding innovative but rubbish research proposals? Mr Archer: The point behind that is for the last two or three years I have sat on two advisory boards which consist of industrialists advising on the manufacturing research that is done in the UK, because the money is being doled out on a block grant and the advisory board kind of makes sure it is given to the right day-to-day projects. There are pretty senior people on these panels, and quite experienced, and, as I say, we seem to spend most of our time pushing the risk agenda up and making them more demanding because a lot of the work that comes forward that passes peer review is as dull as dishwater, because it is reviewed by people working in the space. If somebody comes up with something really exciting which is cross-disciplinary, they do not know which academics they wish to get to referee it. That is a model which I think is quite important. Talking with the EPSRC, they have started to recognise that peer review is an imperfect process for picking the best research topics. They have also recognised that the best research ---- Q511 Dr Harris: Is this innately conservative? Mr Archer: They have done quite an interesting analysis about all biologists criticise everybody else's biology proposal, whereas all physicists endorse all physics proposals. There is a certain sort of clique behaviour, shall we say? Which is fine, if you are reviewing a theoretical physics paper and there are only five other guys in the world who understand it, but when it comes to engineering and manufacturing issues it is a bit more complicated. The academic community is not always best qualified to pass judgment on this stuff. So, as I say, the EPSRC have talked about leadership and ambition as being at least as important as academic rigour in some of the things they would like to support in future, which I think is a really interesting conclusion. Chairman: Richard, this is heresy. This is heresy. So I will move you on to Dr Iddon. Q512 Dr Iddon: I just want to look at interaction with government now, and giving advice to government. Who speaks for engineering, as far as you are concerned? Where are the loudest voices that the Government listens to? Mr Archer: I think one or two industry sectors do quite well, particularly aerospace. I think they are very good at lobbying government - I am sure you have worked that out for yourself. That is not saying it is wrong; I am just saying they are very good at it. Q513 Dr Harris: The arms sector? Mr Archer: Yes, the same thing, and defence contractors and related people like that. I have never ever felt that anybody spoke for me to government, if you see what I mean. I am an associate member of one institution which I joined when I left university, and I keep paying the fee - for reasons I do not understand - but I do not regard the institutions as representing engineering terribly well, to be honest. Mr Pamenter: You have got to separate
sector business industries. The
pharmaceutical industry has clearly got an awful lot of government liaison and
contacts, but who represents the best interests of the Mr Midgley: I echo what Richard said. I am not sure who speaks for me as a consumer products manufacturer. The consumer products and food industries, obviously, have their industry associations and lobbies in place on issues of nutrition, labelling and, indeed, regulation around product composition and so on. It is interesting, in a way, that if you want to cover the waterfront of government policy which might be influential on your industry you have more work to do, perhaps, than you had originally thought, because it is obvious looking at the manufacturing strategy that that has been very, very carefully and, no doubt, well influenced by people who have engineering and manufacturing right at the core of their businesses. Others who have it as an important component may be preoccupied with other things with government, and therefore get less airplay than some others. That may be an answer to your question. Q514 Dr Iddon: If the Government wants some advice about science it will ask the Royal Society, probably, first, and say: "Which learned society are you pointing me to? Where do I get this advice?" If the Government wants advice in engineering what are the channels they use, by comparison? Do they use the channels? Mr Archer: I would like to see the Royal Academy of Engineering as being the powerful, single body to which they would go, but it is not, at this point in time; it is just one amongst many, as far as I am concerned. I do not know how the Government gets engineering advice, to be honest. Dr Gibson: The Royal Society? Q515 Dr Iddon: There are over 40 engineering institutions in my book. What about you guys? Mr Midgley: I do not know how it works, frankly. To answer your question straightforwardly, I just do not know where the Government gets engineering advice. I know, obviously, they go to academic institutions; I know they obviously reach out to the various engineering societies, and so on, and no doubt they consult large engineering companies and sectoral organisations but, as we are seeing, it ultimately does not cover completely the waterfront and, maybe, misses things that are important and emergent in that way. Maybe there is a sense, also, of that about this. Mr Pamenter: I think it comes back to the point that engineering has evolved with industry. It exists to create and deliver scientific realities. So it has necessarily been compartmentalised. I think what you are identifying is there is a recognition that engineering is a discipline; a way of looking at issues and providing information on issues, and I do not see that you have that point of contact like you do with the Government Chief Scientist at the moment. Q516 Dr Iddon: That leads me to my next question. Do you think there ought to be a Chief Engineer, who is giving advice directly to the Prime Minister and the Cabinet? Mr Archer: Yes, absolutely. Q517 Mr Boswell: And in individual departments as well? Mr Archer: And in the relevant individual departments as well, yes, but you do not get many. Q518 Dr Iddon: Is that the feeling of the other two panellists? Mr Midgley: I will tell you what I am thinking: I am thinking that some years ago Unilever did away with its Chief Engineer, and I am trying to figure out why and, indeed, whether there are any parallels. My instinctive reaction is yes, and I think that is right. I think the challenge for the chief engineering role in Unilever was straightforward; that it became unclear what that individual in a business context was actually being paid to deliver and execute in a very changing and much more integrated business environment, where engineering was used in a more diffuse way across the corporation. If you want a voice that the Government can speak to and can, hopefully, reach out across the whole breadth of engineering and take that seriously, I think that would be a good idea. Mr Pamenter: There are two questions to answer. The first is: what is the best way to get the Government to get engineering advice? It might be from multiple, different engineers in different departments - I do not know. I think the second thing that would undoubtedly be true is if you were looking to create a more inspirational theme for engineering, it would be a fantastic statement to create a Government Chief Engineer. Q519 Dr Iddon: My final question is: have any of your organisations been asked to give advice to government recently, and if so was it successful or unsuccessful? Did the Government listen? Mr Archer: Certainly as a company we
were never asked. I now have time to
spend on interesting things, so I am turning myself into a stem cell and gender
(?) medicine specialist, and I am involved in giving advice to government and
working quite hard at getting contact with government, which is a different
issue - which is possible but it would be quite a difficult thing to fit in
with a day job, I have to say. You do
have to invest a lot of time to go down multiple channels, particularly if it
is cross-departmental, as this particular topic is. So my feeling is that probably if you had a
Chief Engineer there is probably a mafia of about 200 engineers in the Mr Pamenter: In an engineering context, not specifically, but a recent example would be when we were working with the Government on the supply of the anti-virals as a contingency against an influenza pandemic there was a lot of dialogue, particularly around how we make the logistics work. So we do when there are specific issues, yes. Mr Midgley: Unilever has enormous contacts with government across a range of issues; these days, I would say, especially around nutrition, which is of course a huge issue where Unilever has both massive expertise and, of course, a huge stake. So we have been very active with government in that area, certainly in recent times. Dr Iddon: Thank you very much. Q520 Chairman: On that note, could we thank you very much indeed, Richard, Ian and Richard, for being a very lively panel this morning. We thank you very much indeed for your evidence; we have enjoyed listening to you. Thank you very much indeed. Mr Archer: Thank you. Mr Midgley: Thank you. Mr Pamenter: Thank you very much. |