Business, Innovation and Skills CommitteeWritten evidence submitted by UCATT

1. Introduction

1.1 UCATT is the largest specialist union for construction workers in the UK and the Republic of Ireland, with members both in the public and private sectors. UCATT is the lead union among the signatories to the National Working Rule Agreement of the Construction Industry Joint Council and the Joint Negotiating Committee for Local Authority Craft and Associated Employees. UCATT is represented on a number of construction industry related bodies by the General Secretary including the Strategic Forum for Construction, the Construction Industry Training Board and the Construction Skills Certification Scheme.

1.2 UCATT has a long history of promoting the use of high quality apprenticeships and supporting apprentices in securing permanent employment. This work was recognised in 2010 with an award from the Union Learning Fund for UCATT’s contribution to providing advice, support, guidance and information to construction apprentices.

1.3 UCATT commissioned a report in 2008 by Steve Davies, Senior Research Fellow at Cardiff School of Social Sciences, Cardiff University, about the role of apprenticeships. This report, Apprenticeships—A Firm Foundation, is attached as an appendix and examines the growing skills crisis in construction, the barriers to participation in apprenticeship schemes and the steps that are needed to safeguard the future of the construction industry. The points it raises remain relevant today.

1.4 The report calls for a change to procurement policies to ensure that the provision of apprenticeships is a prerequisite for winning public sector contracts; tighter regulation of self-employment; greater efforts to recruit new-entrants from non-traditional backgrounds; and improvements to vocational education and training in construction. It also invites a genuine social dialogue between employers, FE colleges and unions. UCATT therefore welcomes the opportunity to submit evidence to this inquiry as the first step on the road to such a dialogue.

1.5 UCATT’s General Secretary, Steve Murphy, is keen to give oral evidence to expand on the issues contained in this submission.

2. Executive Summary and Recommendations

2.1 The construction industry will play a key role in the economic recovery and needs to have a well-trained and skilled workforce. However, there is a growing skills crisis in the construction sector with an ageing workforce and insufficient numbers of apprenticeships.

2.2 UCATT calls for additional funding for apprenticeships in construction to address this skills shortage. The funding also needs to recognise the high training costs in an industry with specialist equipment and where health and safety is critical. Supplementary funding should also be targeted at attracting under-represented groups into the industry.

2.3 UCATT strongly opposes one year apprenticeships and any attempt to dilute apprenticeships. In order to preserve quality and safety, UCATT does not recognise one year programmes as apprenticeships. There is evidence that the sector needs staff qualified to NVQ levels 2 and 3 and therefore UCATT believes level 2 should be a minimum requirement and level 3 should become the industry standard.

2.4 Apprentices need to be recruited and trained locally.

2.5 There should be no further cuts to grants available to companies offering apprenticeships.

2.6 One of the main barriers to employer participation is the lack of direct employment in the construction industry. UCATT calls for an end to the Construction Industry Scheme to tackle the issue of false self-employment.

2.7 There needs to be more involvement of SMEs in apprenticeship schemes.

2.8 Allowing the market to determine apprenticeship levels has failed. UCATT recommends a strengthening of public sector procurement policies to ensure that contracts are placed with companies who are committed to training apprentices.

2.9 The current arrangement of 100% funding for 16–18 year olds and only 50% for 19–24 year olds disproportionately affects the construction industry which attracts slightly older new entrants. This is because of the health and safety requirements of the industry, the necessity for a mature attitude to work and the physical demands of the job.

3. The Case for Apprenticeships in the Construction Industry

3.1 According to the most recent data from the Government’s Labour Force Survey, there are currently 2.07 million people employed in the construction industry.(1) Whilst there has been a fall in employment over the last two years, the sector still accounts for a significant proportion of the UK workforce—around 7%.

3.2 The 2011 Training and the Built Environment Report by ConstructionSkills, the Sector Skills Council for the construction industry, reveals that the number of first year trainees in construction has fallen to its lowest level in 20 years, to just over 27,000. Apprentices make up just 4,348 of the 27,000.(2)

3.3 Both UCATT and construction companies are very concerned about this growing skills crisis. 77% of respondents to a Chartered Institute of Building (COIB) survey in May 2011 agreed that there is a skills shortage.(3) This is a 5% increase from the previous year and comes at a time when the industry is being badly hit by the recession. There is a real fear that skilled workers made redundant now won’t necessarily return to the industry in the future.

3.4 For there to be such high levels of concern about skills at a time when there is great competition for jobs is alarming and means that the construction sector is not preparing sufficiently for the expected economic recovery. UCATT believes that this lack of skilled workers will damage the sector, as it won’t be able to respond quickly enough when the industry begins to pick up and won’t have the staff with the necessary skills and expertise to meet the productivity and quality standards that will be required. This fear is shared by the companies surveyed by the COIB and 85% believe there will be a shortage of skilled personnel when there is an economic upturn.

3.5 The Blueprint for UK Construction Skills 2012–2016 estimates that the annual recruitment requirement of the construction industry is 46,000 per annum.(4) This is the number of workers required over and above normal rates of turnover. There is a stark contrast between the number of new entrants required and the number of workers currently being trained (27,000). This shortfall is further exacerbated by the number of workers approaching retirement age, whose skills will be lost to the industry.

3.6 Figures included in the Sector Skills Assessment for the Construction Sector 2010 reveal the ageing workforce of the construction industry. The age group with the most manual construction workers is the 45–49 range. Since 1990, the number of workers aged over 55 has risen by 65% whilst the number of employees aged under 24 has fallen by 43%.(5) Construction is a physically demanding occupation. With many workers forced to retire early with health problems, it is vital to have a supply of well-trained younger workers to take their place. The average retirement age of workers in construction is 62 according to B&CE, one of the UK’s largest providers of financial products and pensions to the industry.

3.7 This skills crisis has not arisen overnight. The construction industry has been failing to train sufficient new entrants for decades and skills shortages have caused on-going problems in the sector for the past 30 years.(6) This cumulative effect is now hampering the growth and development of the sector.

3.8 For these reasons, UCATT believes that it is vital that investment in training, especially apprenticeships, is given the highest priority despite the recession. A highly skilled workforce is fundamental to successful economic recovery. Hiring untrained workers ultimately reduces productivity, safety and quality. With the sector contributing 8% of the UK’s GDP, every effort should be made to ensure that the workforce and the industry is prepared for the predicted growth expected to take place between 2014–16.

4. The Case for Additional Funding for Apprenticeships in Construction

4.1 With the number of young people not in education, employment or training rising to an all-time high, serious measures are needed to ensure that opportunities are created for the 1.16 million young people who are currently out of work. UCATT considers apprenticeships to be an important factor in tackling social exclusion and equipping young people with the skills to have a successful and long-term career in construction. Unskilled workers tend to earn lower rates of pay throughout their entire working life so it is vital that young people are given the necessary skills to progress. Workers who complete a level 2 apprenticeship earn, on average, around £73,000 more over their lifetime than those without. Those with level 3 qualifications earn around £105,000 more.(7)

4.2. Craft based apprenticeships and courses are undoubtedly popular with young people and demand is currently outstripping supply. There were almost 33,000 applicants for approximately 23,500 places on construction courses in 2010–11.(8)

4.3 Construction is a dangerous industry. Last year saw 50 workplace deaths. It is therefore essential for construction courses to have a far higher health and safety component than office based apprenticeships. The use of machinery and vehicles also means that training courses are more expensive to run than other vocational courses. A study by the Institute for Employment Research at the University of Warwick showed that there were significant returns for the employer from investment in apprenticeships but the costs of training varied widely between sectors. The cost of training an apprentice in construction costs around £22,000 compared to £2,300 for equivalent apprenticeships in retail and between £1,100–£3,900 in business administration.(9)

4.4 However, any investment in training is recouped within two years. Apprentices are productive members of staff whilst training and are often highly motivated. Participating in apprenticeship schemes can improve employee loyalty and retention and also offers staff development opportunities for those that supervise the apprentices on site. A report by the TUC/Unionlearn showed that 76% of construction apprentices remained with their sponsoring company five years after qualifying.(10) It is also important for companies to be able to adjust to the changing environment and equip their workforce with the new skills and competencies to maximise opportunities in developing areas, such as green and low carbon technologies and sustainability. Fully trained workers are far more able to adapt and apply their skills innovatively.

4.5 The latest figures from the National Audit Office show that 86% of apprentice employers said that vocational qualifications improved their business performance. They also quantified the economic returns for investment in apprenticeships and found that advanced and intermediate apprenticeships produce economic returns of £21 and £16 respectively for every £1 of public funding.(11)

4.6 Furthermore, apprenticeships must be made attractive to areas of the population that are currently under-represented in the construction industry, such as women and people from BME backgrounds. Additional funding will be required to ensure appropriate targeting, marketing, training and mentoring. This is not a problem confined to construction however as just 8% of young people from BME backgrounds are apprentices despite comprising 22% of the school leaving population.(12)

5. The Case for High Quality Apprentices and More Level 3 Apprenticeships

5.1 If young people are to be equipped with the skills necessary to progress in the construction industry, there can be no dilution of training and apprenticeships.

5.2 UCATT absolutely opposes the CBI’s suggestion to introduce a one-year apprentice scheme.(13) Employers want to be sure that new staff have the skills required to work efficiently and safely. For an apprenticeship in construction to be of value to young people and their current and future employers, it needs to be a work based learning package supplemented by college education. It is not possible to equip apprentices with the necessary technical competence, key skills and health and safety knowledge in one year.

5.3 One of the reasons that construction apprenticeships appeal to young people is that they offer a very different approach to learning from their experience at school. Whilst UCATT welcomes attempts to improve overall literacy and numeracy levels, there should be no attempt to place barriers to participation of young people in construction if they don’t have the pre-requisite GCSE grades.

5.4 There is no substitute for on-the-job training and experience. This is why Programme Led Apprenticeships (PLAs) have not been effective. Young people have found it difficult to gain on site experience following the completion of their college course, yet this practical experience is a requirement for successful completion of the NVQ. Figures in an article in The Telegraph suggested that less than 10% of PLAs in the building services industry found lasting jobs.(14) ConstructionSkills consequently phased out the scheme. UCATT believes that the problems that plagued PLAs will similarly affect the pre-apprenticeship programme Pathway to Construction. This scheme offers 16 weeks of work experience to young people on full time construction courses. A pilot scheme had placed only 32 of the 60 students with employers and just 18 went on to secure a full apprenticeship.(15) UCATT opposes unpaid work experience where the placements involve real work.

5.5 UCATT considers a worker qualified to NVQ level 3 to be an advanced skilled craftsperson and would like to see higher take up rates of level 3 qualifications. This cannot be achieved in one year. Traditional apprenticeships in construction take 3 years in England and Wales. Evidence for this comes from the latest Training and Skills in the Construction Sector report. None of the employers provided level 1 training as it is not considered sufficient. Although 53% of companies offered no training, of those that did, 47% offered training at level 2 and a further 23% at level 3.(16)

5.6 In Scotland, an apprenticeship takes four years, yet Scotland has higher apprenticeship levels in construction than most of England and Wales. In Scotland, employer awareness of different types of apprenticeships is far higher than in England—74% compared to 39%.(17) The subsequent take-up rate of apprentices is also higher in Scotland than in many other areas, eg 27% of Scottish employers offered construction apprenticeships in 2011 compared to just 7% in London.

5.7 In 2010, there were 1430 Scottish Building Craft Apprenticeship registrations. Whilst these figures are down from previous years (2009: 2,105 registrations, 2008: 2,271 registrations, 2007: 2,758 registrations), the Scottish workforce comprises just 8% of the UK construction workforce. Scotland is therefore employing more apprenticeships as a proportion of their workforce than England and Wales. Consequently, the CBI’s analysis that the length of time required for completion deters companies from engaging apprentices reveals a misunderstanding of the barriers to participation. UCATT asserts that any proposal to diminish the length of apprenticeships cannot be applied to construction.

5.8 The CBI’s demand that the Government freeze the national minimum wage youth rate is also counter-productive. Studies have shown that low pay is one of the reasons for non-completion of apprenticeships as apprentices leave to take-up work that is better paid.(18) If there were higher rates of pay for apprentices and completion rates increased, this would encourage companies to invest their time in training.

5.9 Whilst there are benefits to having a national scheme for apprenticeships, for example, it can make it easier for administration and can help companies by offering a single point of contact, apprentices need to be recruited and trained locally. The idea that a National Apprentice Service could operate in a similar way to UCAS shows a fundamental misunderstanding of the situation of potential apprentices. Young people earning £2.60 an hour cannot afford to live independently and are therefore unable to be geographically mobile. The industry also needs to be able to meet the demands of local and regional projects.

6. The Case for Apprenticeship Bonuses and the Involvement of More Small and Medium Sized Businesses

6.1 The level of the CITBConstructionSkills grant payable over three years to a company training a construction apprentice has been frozen at £9,000 following a reduction from £9,820 in 2010. UCATT believes that not increasing this grant at a time when companies need to be encouraged to expand their apprenticeship levels is compounding the problem of insufficient apprenticeships.

6.2 There is clearly a great deal of reluctance by many employers to take on apprenticeships. Undoubtedly, the continuing economic uncertainty is a barrier as overall employment rates in the construction sector are falling. However, there are other factors at play and UCATT believes that additional measures are required to tackle the short-termism present in so many construction companies.

6.3 The most significant reasons for insufficient numbers of apprenticeships in the construction industry are the high levels of sub-contracting, reliance on short term contracts, high use of agencies and the rates of self-employment. Of the 2.07 million workers, 1.19 million are employed and 880,000 are self employed.(19) The rates of self-employment in construction are higher than in of any other sector of the workforce. Much of the self-employment in the industry is false self-employment. Employers encourage workers to declare themselves as self-employed through the Construction Industry Scheme (CIS). Companies deduct tax for the Inland Revenue but do not deduct National Insurance contributions. This system is unique to the construction industry and if people are not directly employed then companies are unwilling to train workers and don’t have the staff to manage and supervise apprentices.

6.4 The larger the company the more likely they are to offer apprenticeships—with 63% of companies with over 100 employees offering apprenticeships compared to just 11% of companies that employ nine staff or less. The high level of self-employment across the sector, especially in London, is therefore the most significant factor in determining the number of apprenticeships offered in the construction industry. Tackling false self-employment by ending the CIS and improving levels of direct employment is the only way to ensure an expansion of apprenticeship levels and will also improve staff loyalty and stability.

6.5 However, there are many large companies in construction that do not offer apprenticeships because they do not directly employ construction workers and rely solely on sub-contracting. Large companies in the UK lag far behind their European counterparts with only 30% of companies with more than 500 employees offering apprenticeship schemes. In Germany, almost all companies of that size offer apprenticeships.(20)

6.6 Stephen Timms MP, when he was Minister of State for Competitiveness, acknowledged this problem and told the Commons BERR Committee in 2008: “In Scotland and the north, where direct employment tends to be the norm, there is very strong commitment on the part of employers and I welcome that. In the south, however, where the use of self-employed and sub-contract labour is much more common, apprenticeship opportunities are fewer…”(21)

6.7 With smaller companies increasing their share of the workload in 2011, there has to be a serious dialogue about how apprenticeships can work for smaller companies. The workload of a small company is often too narrow to provide the necessary grounding for an apprenticeship. An analysis by company size shows that small companies (four employees or less) had increased their share of the total workload to over 20% by the end of 2011, from 15.5% at the start of 2010. This has been at the expense of larger companies (100 employees or more).(22) Host Employer Models may be part of the solution based on the main contractor recruiting and administering apprenticeships which are then allocated to the sub-contractors. The scheme is overseen by a large company but the benefits are felt throughout the supply chain. However, UCATT cautions against this approach unless there is tight regulation to ensure consistency and quality of training, adequate supervision of the apprentice and strict adherence to health & safety.

6.8 In order to boost apprenticeship levels, UCATT calls on the Government to strengthen procurement policies of central government, devolved administrations and local authorities. Policies should stipulate that successful bidders have a commitment to taking on apprenticeships. Leaving the market to determine the number of apprenticeships has failed. As Steve Davies, Senior Research Fellow at Cardiff School of Social Sciences, Cardiff University concluded: “If ever exhortation and a ‘light touch’, laissez faire approach to training was going to work, it would have worked in the last decade, when the sector experienced ten years of solid growth”.(23)

7. The Case for Amending the Current Funding Arrangement for Training of Apprentices

7.1 The current arrangement of 100% of funding for 16–18 year olds but just 50% for 19–24 year olds disproportionately affects the construction sector as many apprentices in construction start post-18. This is because of the health and safety requirements of the industry, the necessity for a mature attitude to work and the physical demands of the job.

7.2 This arrangement also discourages progression to NVQ level 3. This creates additional skill shortages in the specialist trades and also truncates personal progression and development as well as average life-time earnings. All apprentices should have the right to progress to level 3 if they wish to do so.

7.3 UCATT believes that full funding for both level 2 and 3 NVQs for both 16–18 and 19–24 years olds will be the most productive way of securing an appropriately skilled workforce and encouraging employer participation. For the past decade, the number of first year trainees in the industry has remained consistently at 50% aged under 18 and 50% aged 18 or over.

3 February 2012

References

(1) http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/january-2012/index-of-data-tables.html#tab-
Jobs-tables
JOBS02: Workforce jobs by industry.

(2) http://www.cskills.org/uploads/training-and-built-environment-report-2011_tcm17-26468.pdf

(3) http://www.ciob.org.uk/sites/ciob.org.uk/files/CIOB%20Skills%20in%20the%20Construction%20Industry%20
2011_0.pdf

(4) http://www.cskills.org/uploads/CSN-Report-National-Overview_tcm17-28589.pdf

(5) http://www.cskills.org/uploads/ssaukreport2010_tcm17-26611.pdf

(6) Chan, Paul & Dainty, Andrew (2007). Resolving the UK construction skills crisis: a critical perspective on the research and policy agenda. Construction Management and Economics vol. 25.

(7) http://www.ippr.org/images/media/files/publication/2011/11/apprenticeships_Nov2011_8028.pdf

(8) http://www.cskills.org/uploads/training-and-built-environment-report-2011_tcm17-26468.pdf

(9) http://www.apprenticeships.org.uk/Employers/IER-Research.aspx

(10) http://www.unionlearn.org.uk/files/publications/documents/216.pdf

(11) http://www.nao.org.uk/publications/1012/adult_apprenticeships.aspx

(12) UnionLearn. (Spring 2012) Southern and Eastern Region Update.

(13) http://www.cbi.org.uk/media/1138544/cbi_action_for_jobs_oct11.pdf

(14) The Telegraph, 15 January 2010.

(15) http://www.cskills.org/uploads/97-TC-meetig241110_tcm17-25189.pdf

(16) http://www.cskills.org/uploads/Training-Skills-Survey-Reports_tcm17-27270.pdf

(17) Ibid.

(18) https://www.education.gov.uk/publications/eOrderingDownload/RB217.pdf

(19) http://www.ons.gov.uk/ons/rel/lms/labour-market-statistics/january-2012/index-of-data-tables.html#tab-Jobs-
tables
JOBS02: Workforce jobs by industry.

(20) http://www.ippr.org/images/media/files/publication/2011/11/apprenticeships_Nov2011_8028.pdf

(21) Davies, Steve (2008). Apprenticeships—a firm foundation. London: UCATT, p 38.

(22) http://www.ons.gov.uk/ons/rel/construction/output-in-the-construction-industry/november-2011/index.html

(23) Davies, Steve (2008). Apprenticeships—a firm foundation. London: UCATT, p 4.

Prepared 5th November 2012