Business, Innovation and Skills CommitteeWritten evidence submitted by the Heating and Ventilating Contractors’ Association (HVCA)

The Heating and Ventilating Contractors’ Association (HVCA) welcomes the opportunity to submit evidence to the inquiry.

HVCA is the UK’s leading trade association for building services engineering contractors and represents the interests of over 1,500 firms active in the design, installation, commissioning and maintenance of heating, ventilating, air conditioning and refrigeration (hvacr) products and equipment.

Founded in 1904, the Association adds value to members’ businesses by providing quality services, promoting excellence and shaping the commercial environment through representation and leadership.

The Association will change its name to B&ES on 1 March 2012.

Our subsidiary company Building Engineering Services Training (BEST) is a leading UK training provider for the Building Services Engineering (BSE) sector, covering heating, and ventilating, air conditioning, refrigeration, plumbing and electro-technical industries.

BEST has successfully managed the training of over 10,000 apprentices and introduced them as skilled personnel into the building services industry.

In addition, it has up-skilled the industry’s existing workers, allowing them to gain a recognised qualification to reflect their many years of experience.

This document has been discussed and shared with our Association Members and our industry partners including the United Kingdom Contractors Group (UKCG) and the Electrical Contractors Association (ECA).

Submission

The Association’s views may be summarised as follows:

1. An ageing workforce

Skills are a key area of concern for the Association. The average age of a qualified Craftsman in our Industry (NVQ Level 3) is 45–55 years old. Industry Craftsmen are expected to hold industry recognised qualifications, and the looming skills shortage has been exacerbated by a long-term decline in employers taking on apprentices, partly as a result of a rise in the use of agency labour which is borne from uncertainty of their future workload and the rising costs of employment overheads.

There is now a serious risk that an ageing workforce and the removal of the default retirement age, coupled with fewer employers feeling able to offer apprenticeship placements, will impact on the workforce demographic and available future apprenticeship placements leading to a skills and manpower shortage in the future.

2. Current Economic Climate

The building services engineering sector has been hit hard by the current recession but remains well placed to help kick start economic re-growth. When that happens, our sector is labour intensive and will be able to generate a large number of employment opportunities.

The Association supports the Government’s efforts to increase the numbers of apprenticeships, but wishes to point out that the key component to a successful apprenticeship is a committed employer.

In industries such as ours, which is mostly comprised of small businesses, encouraging SMEs to train in difficult economic times is of particular importance. Currently, SMEs make a very significant contribution to training in the industry, especially given that some of the bigger industry players have chosen to employ an indirect workforce (limiting the training that they can offer).

Of course, security and availability of work—particularly in the longer term—is the key factor influencing the decision of any business, but especially that of an SME to invest in an apprentice. Such a decision commits the employer to a three to four year training programme and certainty about the future viability of the business is a central consideration.

All employers, whatever their size, can only commit to a four year apprenticeship programme if they are confident that there is an adequate forward workload to underpin that commitment. In the current climate, there is no certainty of a sustainable workload in the pipeline. However, despite a sharp fall in the number of contracts being carried out across the country, investment in apprenticeships has not fallen proportionately within our sector. This demonstrates employers’ commitment to the long term future of our industry.

With this in mind, certainly in construction, focussed public funding is perhaps the best way to boost meaningful apprenticeship numbers. Government must recognise that capital investment is the only way to stimulate growth and thus employment.

3. Funding Issues

Government and industry need to work together to overcome the barriers our industry faces in providing apprenticeship opportunities, the biggest of which is the reduction in funding for 19+ apprenticeships. The current age-dependent funding rules for apprenticeships (100% for 16–18 year old and only 50% for 19+ year olds) limits a firm’s ability to progress their apprentice onto Level 3 programmes which is our industry standard for a craftsman. Most apprentices are likely to be 19+ before progressing onto Level 3 courses and therefore a flexible delivery contract covering full funding for both Level 2 and Level 3 is required. In the HVCA’s view, the current rapid reduction in funding for over 19+ apprentices is arbitrary and does not take into account different industry operating environments.

Our industry is not asking for more funding, just the ability to use it more flexibly allowing the employer to train the person that best suits the organisation rather than the person that they are able to obtain funding for. Whilst current bonuses for SMEs to employ an apprentice are a welcome measure, a greater level of support to the apprentice is likely to be necessary in the first year when an apprentice is largely unproductive and needs more supervision.

The £1,500 apprenticeship bonus for companies taking on their first young apprentice is very welcome in the context of an investment in skills. However, for more specific and demanding Level 3 apprenticeships, which are likely to be more expensive and with employment costs over four years perhaps totalling £80,000, this level of support is not enough to exert significant influence over a company’s decision to employ. A greater level of support and/or flexibility of funding is necessary.

In the building engineering sector where the majority of operators are micro-businesses and small firms operating in niche markets, SMEs make a very significant contribution to training in the industry as a whole. More specific industry involvement in developing apprenticeship budgets for their respective industries might help attract more employer engagement, particularly where new start figures are flat. It is welcoming to see similar thoughts within the Department of Business, Innovation and Skills document “Employer Ownership of Skills” which we will be reviewing and contributing to at a later date.

We need to focus public funding instead on the kind of apprenticeships that can add value to individuals, industry and the UK economy in the longer term. This may be through indirect funding of apprenticeships to encourage participation, such as by corporation tax or national insurance concessions.

One way of increasing meaningful training is by tying training requirements to public contracts above a certain value. Plans to tie proportionate training requirements to appropriate public sector contracts could help ensure that all firms tendering for public work operate on a level playing field (ie companies that have withdrawn from training as a business model have lower costs and benefit from the investment of others). This would re-establish the acquisition of training as a business driver—which is of particular importance in parts of the economy where a growing market failure exists because industries are not investing in the next generation of skills (such as environmental technologies). For companies that do currently train, we do not foresee any increase in bureaucracy if the measure is implemented in the right way.

Finally, there is currently a funding lottery, based on a wide range of variants such as the apprentice’s postcode, the employer’s postcode or the contract’s postcode through to regional variances, especially in the devolved administrations. This results in inconsistencies in the amount of funding available per apprentice and creates a complex framework to work within especially for national employers.

4. The devaluation of the apprenticeship “brand”

The word apprentice seems no longer to be something young people, or their parents, value the same way they did 10 to15 years ago. Today the term is in common use across many industries and the government are encouraging more to undertake apprenticeship placements than ever before. But maybe that is the problem?

The Association believes the term apprenticeship has been “dumbed down” by applying it to short courses and training schemes/opportunities rather than to a robust training framework such as that adopted in our industry. The word now represents quantity rather than quality, as evidenced by reports that the Government is hoping to create one million new apprenticeships over the next 18 months.

By contrast, our European counterparts, in Germany for example, maintain the relationship between apprenticeships and high standards of skills and training.

Our sector has invested and developed the brand of the apprentice over many years to mean a well rounded individual, trained in both the theory and practical aspects of a role, to a recognised standard, which is rigorously assessed. Apprentices are trained to a minimum of Level Three and shown a variety of pathways to further develop their skills to a higher level. Apprentices are employed and make a valued contribution to that employer for the duration of their apprenticeship which is on average a minimum of four years.

This far exceeds the definition of apprenticeships currently being developed and implemented by well known retailers and fast food restaurants. (Currently Asda have more apprentices than the whole construction industry). We can prove that more apprentices remain longer in our industry post apprenticeship than in other sectors where these lesser apprenticeships are deployed. Furthermore in our sector completion of an apprenticeship is an almost certain guarantee of employment.

HVCA feels that here should be a greater focus on encouraging higher apprenticeships. Firms such as the UK’s major construction contractors prefer to recruit high-potential apprentices that can move swiftly into junior management roles and beyond—these are likely to be individuals that possess the capacity to go to university, but have a different set of aspirations. To ensure the development and retention of a technically-literate management base in this country, the apprenticeship route must be capable of appealing to such individuals and the firms that will employ them.

5. Change of influence over Apprenticeships

Apprenticeships should always be employer driven and yet training providers seem to be becoming the more dominant partner in the arrangement. Training providers appear to be dictating what courses are being delivered and how many apprentices are being trained for our industry, not the employers. Evidence of this is the Government’s decision to continue supporting the standalone technical certificates which cover the purely theoretical component of an apprenticeship and contain no practical site-based element. These full time “programme led” apprenticeships see training providers profiteering in the short term from the large numbers of young people “not in education or employment” to the detriment of the long term future of the industry. Holders of these “apprenticeships” are not employable in our sector, where all apprenticeships must have the learner achieving a work-based training component provided by an employer. There is no economic value in learners believing they have fully qualified when the relevant industry cannot recognise their achievement or offer them employment.

In the HVCA’s view the planned move towards student loans will make this situation worse.

6. Structural issues

The recent changes to the approval process for qualifications and frameworks means that our sector skills council, Summit Skills, now competes with other awarding authorities for revenue and has lost the ability to ensure relevance and quality of frameworks and qualifications being developed and offered to the building engineering services sector.

The social policy agenda is and always will be in conflict with the business agenda. Industry feels that ministers are not looking at the long term, (eg what skills shortages our industry will have in 10 years time) but rather at the short term unemployment figures for the next few months.

In our sector, where the training infrastructure (established training providers, for instance) has long been in existence, as has a culture of training apprentices, the NAS has not had a significant impact on quality or provision. However roles of the NAS and of Sector Skills Councils (SSCs) are blurred in terms of responding to enquiries or seeking stakeholder viewpoints especially when looking at their relationship with industry trade bodies. Whilst recognising the need to engage with employers and potential apprentices, NAS appears to have no process to engage with trade associations and their managing agents, who play a significant part in shaping and influencing our sector’s engagement in apprenticeships. There is also a lack of differentiation between NAS’s role as an externally facing careers adviser and its internally facing role as a certification body for apprenticeships.

HVCA members would welcome the opportunity to give oral evidence to the inquiry.

10 February 2012

Prepared 5th November 2012