Memorandum from EEF (NE 12)
ABOUT EEF IN
THE NORTH
EAST
1. EEF the manufacturers' organization is
the representative voice of 6,000 UK engineering-manufacturing
and technology-based companies. We have over 500 members in the
North East.
SUMMARY
2. The RDA and Government Office have performed
well during the current economic crisis.
3. Manufacturing remains a significant part
of the North East economy. The region is worryingly exposed to
a number of economic imbalances, in particular an overreliance
on the public sector to drive regional jobs and growth. As a result
the region needs to adopt a strategy to maximise the opportunities
of emerging manufacturing markets and technologies.
4. The skills system in the North East,
as in the rest of the UK, remains complex. Recent improvements
to the flexibility of Train to Gain funding have are welcome,
but concerns have also been raised in other regions about the
security of this funding (including that for apprenticeship) beyond
this financial year. This would place a further impediment to
meeting skill needs of sector and region seeking to grow a high
value manufacturing base.
5. The renewables sector offers significant
growth opportunities for the region. The region has a wealth of
transferable skills and capabilities stemming from offshore engineering
sector with could be applied in the offshore wind and marine renewables
sectors. However it is clear that the region faces stiff competition
from other areas of the UK and other countries in attracting investment
in the renewables sectors.
SECTION 1
The role of One North East and the Government
Office in supporting innovation and industry in the current economic
climate
6. The Regional Development Agencies (RDAs)
divide opinion. Many people argue that they are unaccountable
and unnecessary quangos. EEF has a number of concerns about the
RDAs, but we believe that they provide business-led critical mass
for promoting regional economic development. Put more simply,
they are better able to address what are often region-wide economic
issues than central government (too distant) or local authorities
(too fragmented). Critics who propose abolishing them completely
have yet to come up with a credible alternative.
7. Nonetheless EEF believes that RDAs need
clearer objectives, a greater focus on outcomes rather than outputs
and often need to work more closely together to overcome artificial
geographical boundaries. In most cases RDAs should also be commissioning
bodies, rather than delivery agents.
8. In terms of their performance, EEF published
a report in 2007[35]
which found little direct evidence of RDAs having made a major
difference to regional economic development. However, RDAs have
made a major contribution to urban renewal and have come into
their own in coordinating responses to regional crises, such as
the foot and mouth outbreak or the closure of the Rover plant
in the West Midlands.
9. In the spirit of this, One North East
has been active and successful in bringing stakeholders together
to deal with difficulties at Nissan and Corus. (TS add more detail)
The "Real Help for Business", coordinated by One North
East and the Government Office has also been useful to our manufacturers.
The NEPA, NaREC projects were good examples of positive interventions.
There is a more simplified business support
structure and in certain areas of business support are better
directed by organisations such as such as BENE.
10. The "passionate people passionate
places" campaign has been a good marketing vehicle to showcase
the region. The next round of the campaign must now more relate
to business activities.
11. The role of the Regional Minister can
be considered a success and the government office plays a good
part in managing his engagement with private business This has
been particularly effective in the themed sector meetings we have
had with the minister.
12. The GO can play a part in trying to
simplify government and join it up for business to understand
more clearly.
13. The links to Local Authorities should
be used to encourage these bodies to ensure Local authorities
provide good places to create business can be useful here. Simplifying
Planning and improving infrastructures are examples.
SECTION 2
The place of manufacturing industry within the
North East Region
14. The North East has been through fundamental
changes in the last 30 years, but manufacturing remains a vital
part of the local economy. Manufacturing always has and always
will be an important sector in the NE economy. The sector accounts
for nearly 19% of our GVA and we are a net exporter of our goods.
15. Marquee names such as Nissan, BAE systems,
Rolls Royce, Siemens, Komatsu, Caterpillar, and GSK remain major
employers in the region. And the North East is host to a range
of vibrant and often innovative supply chain companies.
Oil & Gas, defense, automotive, marine design,
higher skilled precision engineering are the major sectors of
our manufacturing base.
16. Despite the overall decline in manufacturing
employment in the region, around 140,000 people still work in
the sector.
17. Meanwhile North-East based companies
in the low-carbon industries, such as Clipper (a recent inward
investment) and Smiths Electric Vehicles offer a glimpse of the
potential future for the sector in the region.
18. However, manufacturers continue to face
challenges, the most immediate of which is the current economic
downturn. While EEF's latest forecasts point to a sharp contraction
in manufacturing output this year, of around 11%, they also indicate
that the worst is now behind us. For the past six months manufacturers
have been grappling with a collapse in global demand, but attention
is now turning to preparing for the upturn.
19. The recession has highlighted a series
of structural imbalances in the UK economy. Recent UK economic
expansion has been driven by a financial services boom, the growth
of easily available credit and rises in public spending. Now that
these engines of our economy have gone into reverse there is a
question mark about where future growth will come from. This question
is especially pertinent in the North East which, through both
the collapse of Northern Rock and the region's high preponderance
of public sector employees, is worryingly exposed to these imbalances.
20. As a result, there is now a widespread
acceptance amongst policy-makers about the need to "rebalance"
our economy, giving greater prominence to a wider range of sectors
and growth opportunities, particularly advanced manufacturing.
The challenge now is how to make this happen.
21. The government, through its recently
published New Industry, New Jobs strategy paper, has begun
to look at how to address this issue. The paper included an admission
that the UK will need to take a more proactive approach to supporting
the development of new technologies and markets. This will need
to be followed by clear indications of how policy levers such
as procurement and infrastructure investment can be used to support
this effort.
22. This also has clear the implications
for the North East. Just as there is a debate at national level
about the shape of our economy, we in the region will need to
develop a vision of what the North East's economy should look
like in the next five, 10 or 20 years.
23. Manufacturing in the North East can,
and must continue, to play a leading role in this vision. We already
have the tradition, existing infrastructure and world-class companies.
However, whether it is new and renewable energy technologies or
low-carbon vehicles, we need the North East regional authorities
to work with national and local government to develop a strategy
and action plan to make the most of these potential opportunities.
24. EEF will be publishing further research
in this area in June and we will be happy to share this with the
Committee.
SECTION 3
Training and skills across industry in the region
25. Manufacturers Skills issues—attracting
and retaining higher engineering skills were among the top concerns
just before the recession. In fact EEF's own regional research
resulted in many actions under the guidance of the Agencies "Talent
and Retention "group.
26. Many manufacturers continue to strive
to hold onto their skilled workforce and use measures such as
short time working, temporary lay-offs, higher than average use
of downtime for training.
27. Some regional statistics on training
and on apprenticeships in engineering and manufacturing are available
if required.
28. We do have, but all too infrequent employers
engaging with HE to deliver higher level skills, but policy needs
to be more innovative to expand collaboration beyond large companies.
Current examples are The Engineering Business, Wellstream and
Siemens.
29. The raft of changes to the skills infrastructure
in the past decade have not adequately supported firm's efforts
to upskill and reskill the workforce. The system is incredibly
complex for employers to navigate and find what they want when
they need it, which in itself can be a barrier to meeting skills
ambitions.
30. Recent improvements to the flexibility
of Train to Gain funding has been welcomed, but it is not always
clear from dialogue with members that changes to the offer have
been adequately communicated.
31. However ... concerns have also been
raised in other regions about the security of Train to Gain funding
(including apprenticeships) beyond this financial year. This would
place a further impediment to meeting skill needs of sector and
region seeking to grow a high value manufacturing base.
32. In addition, further significant changes
to the planning and funding of skills are taking place. Not convinced
that this is the right time nor that it will deliver the demand
led system of funding that government (and employers) aspire to.
Need for clear remits and lines of responsibilities between those
regional agencies involved in skills.
SECTION 4
The role of renewables in the North East economy
33. The renewable energy industry is becomingly
increasingly important to the economy of the North East.
34. The region has the fastest growing renewables
industry in the country. Based on 2007 annual growth rates, leading
the way are wind (7.97%), photovoltaic (7.52%) and wave and tidal
(6.61%) sectors.[36]
Offshore wind and marine renewables have been identified by government
as two of the five low carbon sectors with best the greatest economic
potential.[37]
35. As outlined above, the region has successfully
established world-class R&D facilities at Blyth's New and
Renewable Energy Centre (NAREC) and has a proven ability to attract
investment from leading manufacturers (eg Clipper Windpower).
36. However, whilst there are number of
notable success stories, there remains significant untapped potential.
The region has a wealth of transferable skills and capabilities
stemming from offshore engineering sector with could be applied
in the offshore wind and marine renewables sectors. At the same
time, it is clear that the region faces stiff competition from
other areas of the UK and other countries in attracting investment
in the renewables sectors.
37. At national level there are various
policy approaches that can be taken to promote the development
of low-carbon technologies. Manufacturing accounts for nearly
40% of economic activity in the UK renewable energy sector, three
times as much as in the economy as a whole. Therefore government
must ensure that the UK has as attractive and competitive a business
environment as possible for manufacturing which is research and
capital intensive. So keys areas include innovation and the taxation
of capital investments and R&D.
38. But beyond the broader business environment,
the government needs to set out a clear low industrial strategy
identifying how priority sectors will be supported to translate
potential into wealth-generating businesses and sources of employment.
This must include creative thinking and use the policy tools available
support to product development, workforce skills and supply chains
in priority sectors. Wherever possible successful programmes,
such as Supply Chain Groups Programme and the Low Carbon Vehicle
Procurement Programme, should be replicated and applied in the
renewables sector.
35 EEF (2007), Improving Performance?-A Review of
the Regional Development Agencies. Back
36
Innovas (2009), Low Carbon and Environmental Goods and Services:
an industry analysis. Back
37
HM Government (2009), Investing in a Low Carbon Britain. Back
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