FREEDOM OF INFORMATION REQUEST – SKILLS

							FREEDOM OF INFORMATION REQUEST – SKILLS
“I would be grateful if you would provide copies of documentation created by your department over the last six months relating to the impact of current skills gaps on business and any assessment you may have undertaken thereon. In particular, I would be grateful if you would provide copies of any internal reports, memorandums, notes of meetings with Ministers from your department where this was discussed, any correspondence as well as any email to or from your department during this time concerning the impact of skills on business.” 24 January 2006

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INDEX TO DOCUMENTS BEING RELEASED Document Document number 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Skills for Science and Innovation DWP paper: Analyzing Skills Shortages through Labour Market Indicators – 16th August 2005 DWP paper: A Review of the Work on Skills Shortages – 17th August 2004 DWP paper: Series of papers analysing what LMI suggest about development of skills shortages since 2001 – 1st September 2005 UK Leadership and Management: Evidence & Activity – October 2005 Skills shortages research Gerry Sutcliffe draft speech and briefing for APPG Steel & Cast Metals meeting on Skills Gaps – 19th January 2006 All extracts that are relevant to the request, from DfES paper: Phil Hope draft speech and briefing for APPG Steel & Cast Metals meeting on Skills Gaps – 19th January 2006 SEMTA skills issues submitted after APPG Steel & Cast Metals meeting on Skills Gaps All extracts that are relevant to the request, from unfinished draft speech on Skills in the Future Economic Success of the UK – not used All extracts that are relevant to the request, from Alun Michael draft speech for opening of extension to NG Bailey’s training centre All extracts that are relevant to the request, from Barry Gardiner draft speech for Manoj Ladwa Solicitors & National Skills Forum event All extracts that are relevant to the request, from Lord Sainsbury draft speech for the New Engineering Fellowship Seminar Scheme – 11th January 2006 All extracts that are relevant to the request, from Skills contribution to Lord Sainsbury Manufacturing speech – November 2005 All extracts that are relevant to the request, from Barry Gardiner draft speech for Innovation and Skills event – 8th September 2005 All extracts that are relevant to the request, from briefing for Lord Sainsbury R&D Discussion with Pharmaceuticals Industry – 6th September 2005 Update on inspired leadership – 20th September 2005 Briefing on management & leadership DTI Summary of Leitch Review interim report – 15th November 2005 All extracts that are relevant to the request, from Skills Alliance

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21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43.

meeting note – 23rd November 2005 E-mail: National Skills Academies Press Notice All extracts that are relevant to the request, from press briefing on National Skills Academies – June 2005 CBI’s response to the Government’s White Paper, Skills: Getting on in business, getting on at Work All extracts that are relevant to the request, from East of England RSP response to Skills White Paper All extracts that are relevant to the request, from South West RSP response to Skills White Paper All extracts that are relevant to the request, from South East RSP response to Skills White Paper All extracts that are relevant to the request, from West Midlands response to Skills White Paper Draft (undated) letter from Charles Clarke to Alan Milburn regarding skills shortages in the power industry All extracts that are relevant to the request, from briefing titled “Skills in the Chemical and Chemistry-using Industries” Speech by Meg Munn on 10th November 2005 at the Westminster Hall debate on Maximising Women’s Skills in the Economy Proposal to the Offshore Training Foundation. Speech by Alun Michael on construction: launch of Inspire Scholarship, 5th October 2005 Speech by Gerry Sutcliffe: Third Automotive Academy Annual Lecture, 21st November 2005 Correspondence from Tim Balcon of EU Skills regarding skills shortages in the power industry Letter from Malcolm Wicks to Alan Milburn MP dated 10th December 2005, regarding skills shortages in the power industry Response of SEMTA to the Leitch Review Response of EEF to the Leitch Review Response of the Engineering and Technology Board to the Leitch Review All extracts that are relevant to the request, from minutes of meeting of People Management Board, 27th October 2005 All extracts that are relevant to the request, from the minutes of the 9th November 2005 plenary meeting of the Shipbuilding and Marine Industries Forum, concerning skills gaps in the sector E-mail to Christine West dated 17th November 2005 on the Skills and People Agenda All extracts that are relevant to the request, from the SBAC briefing note for Communications on the Skills Delivery Programme All extracts that are relevant to the request, from the e-mail to Ged Leahy and Rhiannon Chapman dated 6th February 2006

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SKILLS FOR SCIENCE AND INNOVATION
1. The Government’s Skills Strategy was published in July 2003 and reiterated in the March 2005 White Paper, Skills: Getting on in business, getting on at work. A central message is that employers need to be much more closely involved in planning and investing in training while providers need to think in terms of the UK’s skill base and what they can do to ensure that it grows and changes to meet the demands of the 21st century. The Skills for Business Network has a key role to play in this process. This comprises the Sector Skills Development Agency (SSDA) and a network of employer-led Sector Skills Councils (SSCs). 2. The Skills for Business Network is charged with working directly with employers, government and delivery partners in each country and region throughout the UK to: • • • • Increase UK business and public services productivity and performance through targeted evidence-led action on skills; Reduce skills gaps and shortages, anticipate and respond to future skills needs and to help individuals make informed choices about careers and skills development; Increase the opportunities for participation in the UK workforce and for individuals to fully contribute their skills to successful business and public services performance; Increase the relevance, availability and quality of qualifications, learning pathways and skills development opportunities in the workplace and through vocational and occupational learning providers.

3. Each SSC is required to develop a Sector Skills Agreement (SSA) designed to deliver action to meet priority skill needs that will drive improved business performance. SSAs provide a means whereby employers and employees in each sector can identify skills and productivity needs, the action they will take to meet those needs, and how they will collaborate with providers of education and training so that skills demand can directly shape the nature of supply. The focus of the agreements will be on national sector issues, although delivery is expected to involve a regional and local dimension. Operationally, an Agreement will put in place a framework which allows employers to sign up to a key set of sector skill priorities with the main funding and delivery agencies. This framework will allow all parties to agree what actions collectively will be taken to meet the identified priorities by: • • • Providing strategic employer leadership; Putting in place a mechanism for identifying shared objectives and contributions between employers and agencies; Establishing a clear set of accountable actions.

4. Four pathfinder SSAs are already in place and work is in hand to develop SSAs for the whole network. A note on the particular skills issues facing science and innovation provided by the SSDA is attached. These issues are being addressed by the SSCs concerned through their SSAs. At 4

the regional level, the Regional Skills Partnerships, led by the RDAs and including the Skills for Business Network, are working to ensure that regional innovation and skills strategies are effectively linked. BR Cross cutting skills team 31 August 2005

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SKILLS FOR SCIENCE AND INNOVATION
Briefing note from the Sector Skills Development Agency 1. This briefing is based on 5 Sector Skills Councils (SSC) who have some responsibility for at least one of the top 10 UK sectors for R&D investment. The 10 are listed below, with the SSC with responsibility shown in brackets. • • • • • • • • • • Pharmaceuticals and biotechnology (SEMTA biotechnology) Aerospace and defence (SEMTA) IT hardware (e-skills UK) Automotive (design and manufacture) (SEMTA) Food production (Improve) Software and computer services (e-skills UK) Electronic and electrical (SEMTA) Oil and gas (Cogent; Energy and Utility Skills) Chemicals (Cogent) Telecommunications (e-skills UK)

2. In order to focus attention on the science and innovation skills with which the DTI is concerned, the demand side briefing focuses on 3 occupational groups within these sectors: o Professionals o Associate Professionals o Skilled Trade occupations Looking at supply of qualifications data, we focus on a number of sciencebased subjects. We also include briefing from the SSCs in regard to these sectors/skill areas. Main points Demand for skills 3. The demand for Professionals, Associate Professionals and Skilled Trade occupations is forecast to increase over the next 10 years. In the sectors covered by Cogent, Improve, SEMTA and e-skills UK, Professional and Associate Professional occupations are forecast to have a higher than sector average increase in demand for employment (table 1), whether triggered by expansion in the sector (expansion demand) or retirement, outmigration of existing workers (replacement demand). In the sector covered by Energy and Utility SSC, Skilled trade occupations are forecast to have a higher than sector average increase in employment (table 1). This suggests that these technical occupations are growth areas in the sectors covered by

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these SSCs, even if the sector overall is declining in net terms there remains gross demand for these skills.1 NB – this data is not yet published, please contact SSDA before public use. 4. e-skills UK’s own forecasts provide further detail and show that while decline in employment is forecast in the IT manufacturing industry, growth is forecast in IT services, such as database activities and software consultancy. The SSC forecasts that the sector will become increasingly focussed on high value added activities as some activities are geosourced and that IT professionals will need to develop new skills, methods and applications for dealing with the vast amounts of information available.2,3 5. Evidence on current shortages in the labour market point to some of these factors presenting problems to employers now. Table 2 presents the density4 of skill shortage vacancies experienced for the three occupations within the 5 SSCs. 5 6. For the sectors covered by Cogent and Energy and Utility SSCs, there is a higher than sector average density of skill shortage vacancies within the Associate Professional and Skilled trade occupations. In the case of Associate Professional occupations, this is more than double the sector average in Cogent (skill shortage vacancies represent 1.1% of employment for Associate Professionals compared to a sector average of 0.4%) and three times the sector average in Energy and Utility (1.3% compared to 0.5%). 7. For the sector covered by e-skills UK, there is a higher than sector average density of skill shortage vacancies within the Professional and Associate Professional occupations. Again, the density of skill shortage vacancies in the Associate Professional occupations is twice that of the sector average (1.6% compared to 0.6%). 8. For the sectors covered by Improve and SEMTA SSCs, there is a higher than sector average density of skill shortage vacancies within the Skilled trade occupations. Frequently, technical and practical skills are the skill types employers seek to fill these vacancies. 9. e-skills UK add some detail to skill types required amongst the existing IT professional workforce. A recent survey found that some of the skill types lacking amongst IT professionals included Emerging technology monitoring, Systems architecture, Service design and Programming/software development. The skill types point to a potential stop on innovation in the sector unless they are addressed. Additionally, a range of other skills are

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Working Futures II. (forthcoming) IT Insights: Trends and UK skills implications. e-skills UK and Gartner Consulting. 2004 3 IT Insights: Employer Skills Needs. e-skills UK. 2004 4 i.e. skill shortage vacancies as a proportion of employment within the occupation and sector. 5 National Employers Skills Survey 2004. Learning and Skills Council. 2004
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required to underpin IT growth such as leadership and management, project management and change management skills. 6 10. In the Electronics sector, SEMTA report that craft and technician trained engineers (sub degree) have the required mix of practical skills and experience to design innovative products but may not have the strategic business skills to bring the product to market; whilst graduates may have studies entrepreneurship as part of their studies but have little in the way of practical skills to design innovative and commercially viable products.7 11. In the Biotechnology sector, SEMTA have identified specific skill shortages relating to senior research staff, bioinformatics skills and managers with knowledge of regulatory affairs and sales/marketing. Maintaining a high quality science base in many disciplines is vital to the success of the sector.8 12. Cogent report that the primary science and technology research priorities in the Chemicals sector can be placed into the following three broad headings: • • • Pacing Technologies – e.g. Bioscience, Catalysis, Combinatorial Technologies, Nanotechnology and Process Intensification. Key Technologies – e.g. Computational Technology, Environmental Technology, New Materials Research, Measurement Sciences, Formulation and Separation Sciences. Platform/Base Technologies – e.g. each division of chemistry and chemical engineering and their interface with additional disciplines (for example, materials and biotechnology) – This is an area of significant growth.9

Cogent also report that they expect the main skill deficiencies in the Oil and Gas sector of the future to be in managerial and technician field.10 13. The Skills for Business 2004 survey explored the extent to which employers felt a lack of skills was preventing them from producing a more complex product or service. Compared to an economy wide average of 26%, the sectors covered by e-skills UK, Energy and Utility Skills and SEMTA all come out higher than average. There are particular concentrations (around a third of establishments) of employers experiencing this skills challenge amongst the following sub-sectors: Recycling, Telecomms, Manufacture of Mechanical Equipment, Manufacture of transport equipment and production and distribution of water. 11
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IT Insights: Employer Skills Needs. e-skills UK. 2004

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Electronics Sector Skills Agreement: Stage 1. SEMTA. 2005 Biotechnology Sector Skills Agreement: Stage 1. SEMTA. 2005 9 Market Assessment for the Sector Skills Council for the Chemical, Nuclear, Oil and Gas, Petroleum and Polymer Industries. Chemical Industry Appendix. Cogent. June 2005. 10 Market Assessment for the Sector Skills Council for the Chemical, Nuclear, Oil and Gas, Petroleum and Polymer Industries. Oil and Gas Industry Appendix. Cogent. June 2005. 11 Skills for Business 2004: Survey of Employers. SSDA Research Report 11. (forthcoming)

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Supply of science qualifications 14. Tables 3-6 present attainment of science qualifications at GCSE; A Level; GNVQ and Degree level. In the main, comparisons between 1999/00 and 2003/04 are presented.12 15. There have been large increases in the number of HEI entries to science based subjects in the last few years, a 57% increase in Computer Science, 44% in Biological Sciences and 43% in Mathematical Sciences, although this latter from a small base. (Table 6) The increase in all science subjects is higher than in HEI attainment generally. This is encouraging, however, it is unclear if this is sustainable given that entries to GCSE and A levels are flat or falling (Tables 3 and 4). 16. Improve (working with the IFST and The Science Council) are currently undertaking some research into the extent of such shortages and will develop short and long term strategies to deal with this. Over recent years, Improve report a drop off in student interest in food-related science- based subjects, shown by a marked drop in applications and acceptances to university and HEIs in food science courses. 17. Information Technology represents 65% of all entries to Intermediate level GNVQs in schools and 35% of entries to Foundation level GNVQ. (Table 5) e-skills UK report that there is little provision at FE and employers currently recruit as many grads from non-IT specific degrees as those that take IT courses. But there is a need amongst graduates for a wider skillset in terms of project management, interpersonal and business skills. The majority of the IT workforce is already educated to level 4 and this is the level of education and training required.13 18. SEMTA report that since the capping of MA programmes at Level 3 this has led to little or no training for technicians at Level 4 and this is impacting on the Electronics and Aerospace sectors in particular. 7, 14

Education and Training Statistics for the United Kingdom 2001. ONS and DfES 2001 and Education and Training Statistics for the United Kingdom 2004. ONS and DfES 2004.
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12

IT Insights: Assessment of Current Provision. e-skills UK. 2004 Automotive Sector Skills Agreement: Stage 1. SEMTA. 2005.

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Table 1 - Changes in employment 2004 – 2014 by selected occupation NB – the data in this table is not yet published, please contact SSDA before public use.
Occupational group Professional Associate Professional Skilled trade SSC sector sub-total Occupational group Cogent Employment (000s) 42 60 69 517 Change 2004 – 2014 % ED -1 -1 -13 -9 RD 34 34 35 34 TR 33 32 22 25 Improve Employment (000s) 18 40 70 471 Change 2004 – 2014 % ED 13 0 -10 -10 RD 34 34 34 34 TR 47 34 24 24 SEMTA Employment (000s) 127 152 376 1,443 Change 2004 – 2014 % ED 0 -1 -18 -10 RD 34 34 35 34 TR 35 33 16 24

Professional Associate Professional 3 35 Skilled trade 50 37 324 -3 34 31 SSC sector sub-total Source: Working Futures II, IER (forthcoming)

Energy and Utility EmployChange 2004 – ment 2014 % (000s) ED RD TR 28 -3 34 31 52 -9 33 23

e-skills UK Employ- Change 2004 – ment 2014 % (000s) ED RD TR 129 28 34 62 148 21 34 54 74 875 -10 23 35 34 25 57

Table 2 - Skill shortage vacancy as percent of occupational/total employment
Occupation Cogent Improve SEMTA E&U 0.2 1.6 1.0 0.5 e-skills 0.8 1.3 0.3 0.6 All economy 0.4 1.1 1.5 0.7

Professionals 0.2 0.0 0.3 Associate 0.3 0.6 1.1 Professional Skilled trade 0.6 1.7 1.1 Total 0.4 0.5 0.6 Source: National Employers Skills Survey 2004

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Table 3 - GCSE and SCE Standard grade entries and achievements for pupils in their last year of compulsory education, in all schools by subject, 1999/00 and 2002/03
Subject Group Number of Entries (000s) 1999/00 2002/03 Percentage achieving grade A*-C 1999/00 2002/03 Change between 1999/00 and 2002/03 Entries (%) Percentage achieving grade A*-C (percentage point) 0 0 -5 1 -3 -6 -1 -2 -2

Biological Science Chemistry Physics Science Single Award Science Double Award Other Science Mathematics Information Technology Design and Technology

71.2 68.8 64.5 77.8 526.8 5.5 732.7 117.4 467.3

67.5 66.5 62.3 77.2 493.8 5.4 671.4 118.9 454.0

85 88 87 20 55 50 52 60 54

85 88 82 21 52 44 51 58 52

5 3 4 1 7 2 9 -1 3

Source: Adapted from Table 4.2 in Education and Training Statistics for the United Kingdom 2004 (ONS/DfES, 2004) and Education and Training Statistics for the United Kingdom 2001 (ONS/DfES, 2001)

Table 4 - GCE A level/SCE Higher grade entries and achievements for young people in all Schools and Further Education Sector Colleges by subject, 1999/00 and 2002/03
Subject Group Number of Entries (000s) 1999/00 2002/03 Percentage achieving grade A*-C 1999/00 2002/03 Percentage achieving grade D-E 1999/00 2002/03

Change between 1999/00 and 2002/03 Entries (%)

Perce achiev grade (perce point) 5 -5 3 -8 7 3

Biological Science Chemistry Physics Other Science Mathematics Computer Studies

61.1 48.9 41.0 9.8 84.5 23.8

57.6 43.3 38.3 7.1 72.9 31.9

59 68 66 55 67 49

64 73 69 63 74 52

28 22 22 31 20 34

28 21 23 25 17 39

-6 -11 -7 -28 -14 34

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Design and Technology

21.6 23.5

60 65

27 27

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5

Source: Adapted from Table 4.3 in Education and Training Statistics for the United Kingdom 2004 (ONS/DfES, 2004) and Education and Training Statistics for the United Kingdom 2001 (ONS/DfES, 2001)

Table 5 - GNVQ entries and results, and VCE A/AS and Double Awards qualifications obtained, by subject, 2002/03
Intermediate and Foundation GNVQ Pupils aged 15 in all schools VCE A/AS and Double Award passes for young people in schools and colleges Qualification obtained Double Award 0.9 0.7 6.2 A Level 0.4 0.4 10.8 AS 0.1 7.0

Qualifications obtained Total Entries Interm- Founddiate ation 4.4 0.6 1.7 75.9 0.7 7.8 GNVQ Part One Interm- Founddiate ation 1.0 27.3 0.3 2.6 Full GNVQ Interm- Founddiate ation 3.4 0.4 0.2 24.9 0.1 0.5

Science Engineering Information Technology

Source: Adapted from Table 4.4 in Education and Training Statistics for the United Kingdom 2004 (ONS/DfES, 2004)

Table 6 - Qualifications Obtained by Students on HE courses at HEIs in the UK by Level of Course and Subject Area, 1999/2000 to 2003/04
1999/00 2000/01 All Levels (000s) 2001/02 All Levels (000s) 2002/03 2003/04 All Levels (000s) Other Undergraduate HE All Levels (000s) % Change 1999/00 to 2003/04

Subject Area
All Levels (000s) All Levels (000s) Postgraduate First Degree

Biological sciences Physical sciences Mathematical sciences Computer science Engineering & technology Total Science All Subjects

24.3 18.3 5.3 21.2 33.2 172.5 460.5

24.4 18.0 5.5 23.0 32.4 177.0 470.3

24.2 17.0 5.5 26.5 32.4 184.1 486.4

30.5 17.6 6.6 30.6 31.1 198.3 511.5

30.5 17.6 6.6 30.6 31.1 198.3 511.5

6.6 5.2 1.5 7.6 9.5 46.2 156.8

25.4 11.7 5.3 19.3 19.1 120.1 282.1

3.1 1.0 0.8 6.3 4.1 52.6 101.0

35.1 18.0 7.6 33.3 32.6 218.9 539.9

44% -2% 43% 57% -2% 27% 17%

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Source: www.dfes.gov.uk

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To:

Mr Wells ELMD Mr Portes WW&PD

From: Niklas Percival ELM5
Employment, Jobs and Geography

Date: 16/08/2005 Cc: Mr Zimmern ELM5 Ms Pereira ELM5

Analyzing Skill Shortages through Labour Market Indicators Issue 1. A series of papers have analyzed what labour market indicators suggest about the development of skill shortages since 2001, first at a national level, and then across different occupations. This paper brings together that analysis. Timing 2. For your information. Summary • • • Despite employment growing and unemployment at record lows, labour market indicators do not provide strong evidence of skill shortages developing at the national level. At the major occupation level, the indicators are consistent with recruitment constraints in Plant & Machinery occupations only. However, there are many people flowing between this occupation and every other occupation, suggesting there are many people in the labour market with the skills required to work in this occupation. The same is also true for all other occupations. Amongst the minor occupations, the indicators find some evidence of recruitment constraints only in Assemblers and Routine Operatives and Elementary Cleaning occupations. These do not appear to reflect skill shortages however. Even at the minor occupational level, there are many people flowing between all occupations.

•

Background 3. Skill shortages occur when employers are constrained from recruiting the workers they demand because there are an inadequate number of appropriately skilled workers on supply at that time. 4. Traditionally skill shortages are analyzed through employer surveys such as the National Employer’s Skills Survey, the BCC Quarterly Employers Survey and the CBI Industrial Trends Survey. The analysis

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of labour market indicators is intended to provide a supplement rather than alternative source of information to these surveys. Choice of indicators 5. The labour market indicators we use are • • • • • The percentage change in the employment level; The number of inflows into employment; The percentage change in working hours and overtime; The percentage change in the hourly wage rate; and The percentage change in the unemployment and inactivity level.

6. First we analyze the percentage change in the employment level and the number of inflows into employment, to see what these two indicators imply about how the demand for labour has changed. Then we analyze the percentage changes in working hours, wages, unemployment and inactivity, to get an indication of whether skill shortages or some other kind of recruitment difficulty is becoming a problem. 7. This is a slightly different approach to the previous papers, which looked at all the indicators together. However, it is reasonable to expect that skill shortages are more likely to develop where the number of new workers needed is growing fastest. 8. If skill shortages are becoming a problem we would expect (i) wages to rise to attract more workers, (ii) working hours and overtime to rise to cover the unfilled vacancies for workers, and (iii) unemployment (and possibly inactivity15) to fall as employers utilize the individuals available to work. 9. For each occupation, unemployment (and inactivity) is given by the number of unemployed (inactive) people whose last job was in that occupation. Since individuals may move into an occupation different to the one they previously worked in, this indicator is considered only roughly indicative of labour supply. Flows between occupations are looked at to provide a more complete picture of the supply of labour. 10. Changes in any of the indicators over the last few years may have been brought about for a whole range of different reasons. For example, wages may have risen not due to a greater demand for workers but because of union wage bargaining or minimum wage increases; hours may not have increased due to the introduction of the working time directive or changes to social norms.

This may not be as responsive to labour demand, since these people aren’t looking for work

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11. No indicator can offer reliable evidence on its own, but by considering the indicators all together we should be able to get a good indication of skill shortages or recruitment difficulties. 12. Changes to the occupational classifications in 2000 prevent us from looking back further than 2001. All data is from the Labour Force Survey. The indicators are updated to include the latest LFS datasets (which may mean the results presented here are slightly different to the previous papers). We analyze the change in the hourly wage rate to avoid the effect of changing working hours on income levels. The National Labour Market Demand for Labour 13. Figure 1 shows the employment level and flows into employment in Great Britain for every quarter between winter 1993 and winter 2004. 14. The employment level has continued to rise over the last few years, although slower than during most of the 1990s, and more in line with the rise in the population, causing a levelling off in the employment rate. 15. This increase in employment has been brought about by fewer numbers of people leaving employment16. The number of new jobs being started has remained remarkably steady over the last 15 years (after accounting for seasonal variation). Figure 1 The employment level and the number of flows into employment every quarter since winter 1993

See our team’s paper ‘Employment retention and population effects for those of working age in Great Britain’, by Angelina Cannizzaro.

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16

27000000 26500000

2500000

25500000 25000000 24500000 24000000 23500000 23000000 22500000 Winter 93 Spring 94 Summer 94 Autumn 94 Winter 94 Spring 95 Summer 95 Autumn 95 Winter 95 Spring 96 Summer 96 Autumn 96 Winter 96 Spring 97 Summer 97 Autumn 97 Winter 97 Spring 98 Summer 98 Autumn 98 Winter 98 Spring 99 Summer 99 Autumn 99 Winter 99 Spring 00 Summer 00 Autumn 00 Winter 00 Spring 01 Summer 01 Autumn 01 Winter 01 Spring 02 Summer 02 Autumn 02 Winter 02 Spring 03 Summer 03 Autumn03 Winter 03 Spring 04 Summer 04 Autumn 04 Winter 04 0 500000 1500000

1000000

Employment level

All inflows

Source: Labour Force Survey

16. The stock of vacancies in the economy has also not grown or fallen noticeably over the last three years. Taking both the constancy of inflows and vacancies, it appears that the demand for labour has not changed considerably. 17. The inflow of vacancies to Jobcentre Plus has risen, but it is possible that this represents a rise in the share of vacancies going to Jobcentre Plus rather than a rise in the number of vacancies in the economy (there is some evidence of this). Supply of labour 18. The number of unemployed people in Great Britain has fallen very slightly over the last few years, after dropping quite rapidly during most of the 1990s. The unemployment rate is now at historically low levels. 19. Over this time, there has been a fall in the numbers moving into unemployment, which corresponds to the observed fall in movements out of work. There has also been a fall in the number of people moving out of unemployment however, as the unemployment level has fallen. 20. However, there does not appear to be the rise in wages that we would expect if there were too few people available to move into work. As Figure 2 shows, the hourly wage rate of all employees has not been growing particularly strongly over the last few years, when compared with growth in previous years. Figure 2 The average hourly wage rate in Great Britain and its annual percentage increase each quarter since spring 1995

Flows into employment

26000000 Employment level

2000000

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12

7% 6% 5% 4%
Annual percentage change in hourly wage

10
Average hourly wage

8

6 3% 4 2% 1% 0%
Spring 1995 Summer Autumn 1995 Winter 1995 Spring 1996 Summer Autumn 1996 Winter 1996 Spring 1997 Summer Autumn 1997 Winter 1997 Spring 1998 Summer Autumn 1998 Winter 1998 Spring 1999 Summer Autumn 1999 Winter 1999 Spring 2000 Summer Autumn 2000 Winter 2000 Spring 2001 Summer Autumn 2001 Winter 2001 Spring 2002 Summer Autumn 2002 Winter 2002 Spring 2003 Summer Autumn 2003 Winter 2003 Spring 2004 Summer Autumn 2004 Winter 2004 Spring 2005

2

0

Mean

annual percentage change

Source: Labour Force Survey

21. It should be pointed out that the LFS wage information has a number of weaknesses, suffering particularly from high non-response rates and inaccurate responses of family member’s earnings, giving rise to potential bias17. 22. The Employers Skills Survey does maintain that employers who report skill shortages are more likely to intensify their recruitment efforts instead of increasing wages. Whilst this may be entirely rational, it does seem to imply that employers believe an available supply of skilled labour exists, only that they are experiencing difficulty in recruiting these people. 23. Whilst employment has grown, Figure 3 shows that the average usual number of hours worked a week by all employees has fallen slightly over time. To add to this, hours of overtime have also not increased. Figure 3 Average usual hours of work in Great Britain since winter 1993.

The Annual Survey of Hours and Earnings does not provide a detailed enough breakdown of minor occupations to be used for this analysis.

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35.6 35.4 35.2
All employees

32.3
Excluding those working over 45 hours

32.2 32.1 32 31.9 31.8 31.7 31.6

35 34.8 34.6 34.4 34.2 Summer 94 Summer 95 Summer 96 Summer 97 Summer 98 Summer 99 Summer 00 Summer 01 Summer 02 Summer 03 Summer 04 Winter 93 Winter 94 Winter 95 Winter 96 Winter 97 Winter 98 Winter 99 Winter 00 Winter 01 Winter 02 Winter 03 Winter 04

31.5 31.4

All employees

Excluding those working over 45 hours

Source: Labour Force Survey

24. The fall in hours has been driven largely by the numbers working over 45 hours. It is possible that the introduction of the working time directive has caused at least some of the fall in hours at top of the hours’ distribution, and thus the overall fall in average hours. 25. On the whole, the labour market indicators do not give clear evidence of labour shortages. Although unemployment is low, the fall in hours and low wage rises are not consistent with a lack of people available to meet employers demand for labour. Major occupation groups Demand for Labour 26. Changes in the employment level have varied somewhat across the different occupation groups. Since 2001, there has been a gradual rise in Managerial, Professional and Personal occupations, and a fall in Plant & Machinery and Administrative occupations. Figure 4 Percentage change in employment level between winter 2001 and 2004

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15%

10%

5%

0% Administrative Professional Associate Professional Skilled Trades Elementary Plant & Machinery Personal Managers Sales

-5%

-10%

-15%

Source: Labour Force Survey

27. Skill shortages can occur in occupations that have rising or declining employment levels, since the level of turnover in the labour market creates a continual flow of vacancies for jobs in all occupations (for example, employers may need to replace individuals that retire). 28. If individuals have not had time to acquire the necessary skills (for occupations with rising employment levels), or if individuals choose not to acquire the necessary skills (for occupations with falling employment levels) because of future job prospects, firms may not be able to find workers with the necessary skills to fill their vacancies. 29. The number of new job starts has been relatively constant for almost all occupation groups over the last few years. The changes in employment instead reflect movements out of work. Elementary occupations are the notable exception, with inflows to employment falling. Supply of labour 30. There are a low number of unemployed people (as defined above) for every occupation group. The numbers are relatively higher for elementary, plant & machinery, and sales occupations, and relatively lower for the managerial, professional and associated professional occupations. This is to be expected given that the cost of leaving a job in the former set of occupations is likely to be lower. 31. The number of unemployed has remained fairly steady for most occupation groups over the last few years. There has been a notable fall in the number of unemployed people who were previously employed in Plant & Machinery occupations. This fall has been driven

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by a smaller number of movements into unemployment rather than a greater flow out of unemployment. 32. Inactivity is higher for all occupations. It has risen for Managerial, Professional and Personal occupations, but has fallen significantly for Plant & Machinery, and also somewhat for Associate Professional and Skilled Trade occupations. Figure 5 Unemployment and inactivity for each occupation as a percentage of the total working age population, in 2001 and 2004
3.5% 3.0% 2.5% 2.0% 1.5% 1.0%
0.99% 1.06% 1.45% 1.40% 0.95% 0.76% 0.81% 0.23% 0.21% 0.14% 0.13% 0.92% 0.86% 0.86% 1.04% 1.10% 1.26% 1.26% 1.21% 0.96% 0.80% 0.74% 0.36% 0.32% 0.21% 0.21% 0.31% 0.29% 0.17% 0.19% 0.33% 0.35% 0.38% 0.28%

2.26%

2.18%

0.5% 0.0%

2001 2004 2001 2004 2001 2004 2001 2004 2001 2004 2001 2004 2001 2004 2001 2004 2001 2004 Managers Profess'nal Associate Admin Skilled Trade Personal Inactive Sales Plant & Elemntary Machinery

Unemployed

Source: Labour Force Survey (refers to average levels in 2001 and 2004)

33. Changes in the hourly wage rate have varied slightly across the occupation groups. It has tended to be larger in Plant & Machinery, Elementary and Sales occupations, although it has not been particularly large in any occupation. The increases have tended to be greater in the latter part of the period. Figure 6 Total % change in the hourly wage between winter 2001 and 2004

21

16% 14% 12% 10% 8% 6% 4% 2% 0% Elementary Plant & Machinery Admin Skilled trade Associate professionals Managers Professionals Personal National RPI-X Sales

Source: Labour Force Survey

34. The greater rise in hourly wage rates amongst lower skilled occupations may in part reflect changes to the minimum wage, which has risen by 18.3% between winter 2001 and winter 2004. It is possible that the fall in employment amongst the lowest skilled occupations (seen above) is linked to this rise in hourly wages. 35. As Figure 7 shows, for most occupations average usual working hours have tended to remain flat or have fallen slightly over time. They have risen slightly in Personal occupations. Figure 7 Change in working hours between winter 2001 and winter 2004.
105 104 103 102 101 100 99 98 97 96 95 Autumn 01 Autumn 02 Summer 01 Summer 02 Summer 03 Summer 04 Autumn 04 Spring 01 Spring 02 Spring 03 Autumn03 Winter 01 Winter 02 Winter 03 Spring 04 Winter 04 Managers Professionals Associate Administrative Skilled Trade Personal Sales Plant Elementary National

Source: Labour Force Survey

22

36. Overtime has fluctuated for all industries, but only in Skilled Trade, Personal and Plant & Machinery occupations has it increased steadily over the whole period. 37. Only in Plant & Machinery occupations do all the indicators move in the direction consistent with the development of skill shortages, although inflows have remained steady. The indicators therefore offer some evidence of recruitment constraints in Plant & Machinery occupations, but not for any of the other occupations. 38. However, the slight change in the employment level of every occupation is the result of much larger numbers of people leaving and entering jobs. Table 1 below shows the number of movements across occupations between winter 2001 and 2004. There are many people moving between all the occupation groups, although there is a clear net movement into higher skilled occupations. Table 1 Total number of occupation changes between winter 2001 and 2004 (000s)
Eventual Occupation. M M P AP Initial Occupation. C ST PP S PM E Inflows. from U from I Total 0 425 819 571 239 119 348 110 206 279 210 P 324 0 664 294 266 127 48 81 41 329 383 AP 542 572 0 702 225 305 395 129 182 472 456 C 396 231 519 0 49 127 511 96 343 637 738 ST 163 176 158 45 0 33 71 372 346 451 340 PP 83 134 264 100 32 0 175 46 291 392 567 S 204 21 248 353 59 110 0 82 489 790 1,220 PM 97 56 101 83 378 32 89 0 465 461 221 E 133 26 129 201 305 175 403 450 0 1,244 1,569 To U 358 238 324 437 464 238 497 375 906 Ouflows. To I 438 486 554 839 423 631 921 351 Total 2,737 2,365 3,780 3,623 2,439 1,897 3,457 2,092

1,404 4,673

3,325 2,556 3,979 3,645 2,155 2,084 3,576 1,985 4,635

Source: Labour Force Survey, 2-quarter longitudinal datasets.

39. The change in the employment level is dwarfed in every occupation by the number of people entering from and leaving to enter other occupations, and by the number of people moving into and out of unemployment. 40. Since the majority of people flowing out of an occupation enter another occupation, most of the ex-employees that employers need to replace remain in the labour force (rather than enter a state of inactivity). This implies there are many people in the labour force with the necessary skills for each occupation.

23

41. The large numbers of people flowing in from all other occupations implies that there are many more people in the labour market with the appropriate mix of skills to do the jobs, and therefore many people who can move into each occupation from any other. 42. Given this, any constraints on recruitment appear not reflect a shortage of skilled labour (although the appropriately skilled workers are in other occupations). Minor Occupation groups Demand for labour 43. In each of the major occupation groups, there are a number of different ‘minor’ occupations. For some of these minor occupations the sample sizes are rather small, and may be used as indicative only. 44. Percentage changes in the employment level have been more significant in these minor occupation groups. The five occupations with the largest percentage increase in employment level – Research Professionals, Conservation Associate Professionals, Social Welfare Associate Professionals, Science Professionals, and Design Associate Professionals - have all been in either Professional or Associate Professional occupations. However, within Personal and Sales occupations, Childcare Services, and Customer Service Occupations (including call centre agents) have also experienced steady employment growth18. 45. Amongst these, there has been a notable upward trend in the number of people flowing into jobs into Social Welfare Associate Professions and Research Professionals over the last three years, and a clear but more moderate increase in the number of people flowing into Design Associate Professional jobs over the last two years, suggesting an increase in the level of recruitment by employers in these occupations. 46. In the other occupations, inflows either have no clear trend or their level too small for significant changes to be identified. 47. The employment level has also decreased considerably in some occupations – of particular note are occupations in Metal Forming, Process Operatives, Assemblers and Routine Operatives, Elementary Agricultural Occupations, and Science and Engineering Technicians. 48. In the first two of these, inflows into employment have clearly fallen during this period, and in the third they have fallen gently. For the last two, inflows have generally been flat.
There is also a large percentage difference between the employment level in winter 2004 and 2001 in personal service occupations not elsewhere classified (which includes undertakers and pest control officers). However, a time plot of the employment level shows that this reflects random variations in the employment level rather than a clear upward trend.
18

24

Supply of labour 49. In the occupations where employment has grown most significantly, the level of unemployment is generally very small. This in part reflects the fact that the number of people employed in these occupations is small. The low level means that any changes over time are not statistically reliable. 50. The exceptions are customer service and childcare service occupations. In these occupations, there has been a slight upward trend in the number of unemployed people. 51. Inactivity levels are larger for all occupations, and this has also risen for customer service and childcare occupations. In design associate professionals it has been on a steady downward trend. 52. By contrast, where employment has fallen significantly, there has also tended to be a steady fall in the number of unemployed people, with the number of people entering unemployment from these occupations falling. Inactivity levels have also fallen steadily for Process Operatives and Assemblers but have risen for Metal Forming. 53. Figure 8 shows that wages have tended not to rise significantly in those occupations where employment has grown most significantly, despite inflows to employment growing significantly for some of them. Where they have risen, they have generally risen slower than the national average. This implies that there exist a sufficient number of people available to meet the extra demand for workers in these occupations. Figure 8 Total percentage change in the hourly wage rate between winter 2001 and winter 2004
40% 35% 30% 25% 20% 15% 10% 5% 0%
Average Design Associate Conservation Associate Process Operatives Childcare & Reltd Metal Forming Science Professionals Research Professionals Customer Service Social Welfare Science Techinicians Assemblers Elementary Agricultural RPIX

Source: Labour Force Survey

25

54. The notable exception is for social welfare associate professionals, where wages have risen by almost 20% between winter 2001 and 2004. 55. Wages have increased significantly in occupations where employment has decreased. The most notable increases have been in Elementary Agricultural Occupations and Assemblers and Routine Operatives. These occupations are amongst those most likely to be affected by minimum wage legislation, and these rises will in part reflect this. However, other occupations likely to be similarly affected have seen much smaller wage rises. 56. Figure 9 plots the change in working hours. Of all the occupations above, only in childcare services have working hours been on a clear upward trend, rising at the start of the period before reaching a plateau at the end of 2002. In most others, working hours have been either flat on a slight downward trend, although there has been a slight rise in working hours for Metal Forming occupations over the second half of the period. 57. Meanwhile, overtime has fluctuated for all occupation groups, but only in Research Professional Occupations, where it has risen quickly over the last year, and in Customer Service Occupations is it possible to discern an upward trend during any time over the period. Figure 9 Change in working hours between spring 2001 and winter 2004
100.15 100.1 100.05 100 99.95 99.9 99.85 99.8
Sp Su ring m 2 m 0 Au er 01 tu 20 m 0 W n2 1 in 0 t 0 Sp er 2 1 Su ring 001 m 2 m 0 Au er 02 tu 20 m 0 W n2 2 in 0 t 0 Sp er 2 2 Su ring 002 m 2 m 0 Au er 03 tu 20 m 0 W n2 3 in 0 t 0 Sp er 2 3 rin 00 Su g 3 m 2 m 0 Au er 04 tu 20 m 0 W n2 4 in 0 te 04 r2 00 4
612 Childcare & Reltd Personal Services 521 Metal Forming, Welding and Related 232 Research Professionals 911 Elementary Agricultural Occupations 813 Assemblers and Routine Operatives 311 Science and Engineering Techinicians 811 Process Operatives 211 Science Professionals 721 Customer Service Occupations 355 Conservation Associate Professionals 342 Design Associate Professionals 323 Social Welfare Assoc Professionals

Source: Labour Force Survey

26

58. Despite recruitment increasing, employment rising and unemployment being low, the indicators do not provide strong evidence of growing skill shortages or recruitment difficulties in those occupations with the most significant growth in employment. This is despite the levels of skills required in these perhaps greater than most19. 59. The indicators offer some evidence of skill shortages developing in Assemblers and Routine Operatives20, with wages having risen, and unemployment and inactivity having fallen significantly. The fall in inflows into this occupation may also reflect constraints on recruitment. It is also possible however that these trends reflect the effect of rising wages (through the minimum wage) on employment. 60. For the other occupations in which employment is falling, there is not strong evidence of skill shortages developing; for these some indicators have moved in the right direction, but others have not. 61. Table 2 below shows that there are some occupations which have not had significant growth or decline in their employment level but which otherwise do appear to be experiencing movements in (at least all but one of) the indicators which we have said are consistent with skill shortages or other recruitment difficulties developing. 62. For Elementary Cleaning occupations, where the employment level has fallen and inflows have also fallen, there have been clear increases in wages, working hours, and a fall in unemployment. 63. Generally speaking however, for the occupations in Table 2, the movements are often not significant and regularly represent erratic changes rather than a continual rise or fall over the period. 64. In all of the minor occupations highlighted thus far, the number of flows into and out of each occupation is large relative to employment, and generally much larger than any changes in employment, with the majority of these flows involving movements to and from other occupations, rather than to different labour market states. 65. This suggests that for most of the minor occupations also (including in Assemblers and Routine Operatives and Elementary Cleaning occupations) there are many people in the labour force that have previously worked in that occupation or who are able to work in that occupation.

Professional and Associate Professional occupations are generally the most highly skilled occupations. 20 Although these are supposedly low-skilled occupations, they may still require the basic numeracy and literacy skills, and the generic skills which are becoming increasingly important.

19

27

Table 2 Percentage change in indicators between winter 2001 and winter 2004 Unemployment Inactivity Working Overtime Hourly level level hours wage rate Quality & Customer Care Managers Teaching Professionals Public Service Professionals Transport Associate Professionals Building Trades Printing Trades Plant and Machine Operatives Elementary Process Plant Occupations Elementary Cleaning Occupations -27.99% -0.61% -100.00% -77.23% -15.61% -85.33% -30.61% -28.16% -21.72% -22.96% 11.15% 29.09% 35.58% -31.02% -8.55% -15.42% -10.95% -2.42% 0.53% 0.12% 3.15% 7.83% -2.25% 1.54% 1.81% 1.56% 2.69% 22.81% 12.76% 8.23% 7.44% 16.75% 1.15% -5.66% -2.04% 10.19% 7.30% 11.64% 33.24% 36.34% 15.16% 14.53% 12.73% 14.86% 14.57%

Source: Labour Force Survey * Cells in yellow represent statistically insignificant changes due to small sample size.

Conclusions 66. Despite employment growing and unemployment at a record low, the labour market indicators do not offer strong evidence of skill shortages developing in Great Britain. 67. There is some evidence of recruitment constraints in Plant & Machinery occupations, where employment is falling, wages and overtime are both rising, and unemployment is falling. 68. However, there are many people moving to and from other occupations, suggesting there are lots of people in the labour force with the skills to do the job.

28

69. Within the minor occupations, the indicators do not offer clear-cut evidence of skill shortages in any occupations, although there is some suggestion of recruitment constraints in Assemblers and Routine Operatives occupations, and possibly Elementary Cleaning occupations. 70. Even at the minor occupation level however, there are many people moving between all occupations, suggesting there are many people with the appropriate mix of skills for all jobs. 71. This analysis does not consider whether the quality of skills the individuals moving into work may have, and so does not look at the extent of skill gaps alongside skill shortages. Final Remarks 72. Happy to discuss

Niklas Percival GTN (391) 22127

29

To:

Bill Wells ELMD

From:

Niklas Percival ELM3
2nd Floor, Adelphi GTN (391) 22127

Date: Copies: A Review of the Work on Skill Shortages Issue:

17th August 2004 See List Below

1. This note looks at the work carried out across government departments and outside organisational bodies such as the BCC and CBI. The main body describes the methods used to measure skill shortages, and the annex provides a description of the trends that are found as a result. 2. The paper intends only to describe the methods used by other organisations, and not offer support for any particular method over another. Nor do the trends arising from this work reflect the views of the department in any way. Timing: 3. For information Summary Some important points associated with the work carried out so far: (i) The main bodies involved in the estimation of skill shortages are the Department for Education and Skills, the British Chambers of Commerce, and the Confederation of British Industries. (ii) Estimates are generally found through the use of surveys. There are important differences between the surveys however, in the way that skill shortages are defined; specifically, whether there is a distinction made between recruitment difficulties and skill shortages. The BCC survey does not distinguish between the two, and use their estimate of recruitment difficulties as a direct measure of skill shortages. The ESS does isolate from recruitment difficulties those that arise as a result of skill shortages. The CBI also refers explicitly to skill shortages. (iii) There are several ways in which skill shortages are measured. These include (i) by the number of vacancies that are hard to fill, (ii) the number of vacancies that lack the skills to fill them (skill shortage vacancies), (iii) as the proportion of total vacancies that are skill shortage vacancies, or (iv) by the number of skill shortage vacancies as a proportion of employment.

30

The DfES and the National Employers Skills Survey 4. The work carried out across government on skill shortage issues has largely been the responsibility of the Department for Education and Skills (DfES), and this has mostly centred around the Employers Skills Survey series, and the more recent 2003 National Employers Skills Survey. 5. The 2003 National Employers Skills Survey (NESS) is a comprehensive survey of 72,100 employers. The survey is the largest of its kind, and continues on from the smaller scale Employers Skill Survey (ESS) series (1999, 2001, and 2002)21, thus providing a time series dataset. 6. The large sample size of the NESS also allows robust estimates of skill shortages across regions, occupations and sectors. 7. Employers are asked whether they have any vacancies, and if so, whether any of these are “hard-to-fill”. Respondents who answer yes are then provided with nine likely reasons that these vacancies are hard-to-fill, and are asked to select the option(s) relevant to them. Three are related to skills22, combining to give the total number of skillshortage vacancies (SSVs). SSVs are thus a subset of hard-to-fill vacancies (HtFVs); it is then necessarily true that all SSVs are HtFVs, but not so that all HtFVs are SSVs. 8. As well as presenting the total number of skill shortage vacancies, the ESS divides this figure by the total number of vacancies and total employment (for region, occupation and industry, as well as nationally) to give two measures of the intensity of skill shortages. The survey also calculates the percentage of employers who report skill shortage vacancies. 9. Following this method, the NESS found that, whilst only 4% establishments reported skill-shortage vacancies, the total number such vacancies equalled 135,000, amounting to approximately 20% all the vacancies reported in the survey (although only 0.6% employment). Work Permits UK of of of of

The first two in this series were based on interviews with 27,000 employers, whilst the 2002 ESS was much smaller with only 4,000 interviews, although more robust in conducting a series of follow-up interviews to ensure the terms and definitions used in the survey were fully understood.
22

21

These referred to a lack of applicants with the appropriate skills, qualifications or experience

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10. The Home Office (through Work Permits UK) assess skill shortages across three broad occupation groups (the ‘Engineering Sector’, ‘Healthcare Sector’ and ‘Other occupations’), in order to ascertain where employers have a real need to recruit from abroad as a result of an acute lack of appropriately skilled labour within the residential labour market. 11. Skill shortages are established through representations made to Work Permits UK by individual employers, which are then checked with such bodies as trade unions, and sector skills councils, and by looking at the numbers of work permits issued for the occupation in question, as well as the number of job advertisements. This approach does not assign a number to the level of skill shortages. 12. Work Permits UK has plans to extend their method to include the use of employer surveys. Other Surveys: The British Chambers of Commerce Quarterly Economic Survey, and the Confederation of British Industries Industrial Trends Survey 13. These two surveys are lacking in several respects relative to the ESS; (i) the size of the two surveys do not permit analysis of skills at the regional level or sectoral level, (ii) the surveys do not provide information on the total number of vacancies (SSVs or otherwise). 14. The CBI survey goes back to the early 1960s, and the BCC Survey goes back to 1993, thus providing a time series. 15. The CBI survey only interviews employers in the manufacturing sector. 16. Its method involves questioning (around 1000) employers about the factors which they think will place a constraint on output. The measure of skill shortages is then given as the proportion of respondents who give a lack of skilled labour as a reason23. 17. The BCC splits recruitment problems between the manufacturing and service sector. 18. Its survey asks (approximately 7,000) employers first if they have attempted to recruit over the past 3 months, and then if they had any difficulty in finding suitable staff. Employers are then asked to highlight the occupation (from a pre-selected list of categories, i.e. Skilled manual and Technical/Professional and Managerial/Clerical/Un and
If it is accepted that skill shortages affect the production of firms, a proposition supported by the findings of the ESS, one may not expect to find much of a difference between the two measures. However, the figure will undoubtedly differ, since there will be some firms that are able to counter the shortage of skills (e.g. firms that are more flexible and who can cover the shortage of skilled labour through the use of such measures as overtime).
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semi-skilled) in which they experienced such difficulties. However, the employers are not asked why they are having difficulty filling these vacancies, and despite the differing degrees of skills required, the distinction between occupations does not in itself enable us to distinguish SSVs from HtFVs. 19. The figure for skill shortages presented in the survey is given as the percentage of employers reporting increased recruitment difficulties minus the percentage reporting lesser recruitment difficulties. Alternative approaches 20. Several other methods of measuring skill shortages exist, which are now considered in turn. • The Report on Jobs

21. The Report on Jobs24 uses original survey data and information on recruitment advertising to offer an indication of skill shortages. 22. The survey questions 400 UK recruitment and employment consultancies (comprising some 1,832,500 employees). The survey asks consultants to compare the demand for staff compared to a month ago, and also to compare the availability of candidates (for both permanent and temporary vacancies) compared to the previous month. 23. When the responses indicate that demand is rising and supply is falling, it is intimated that there is an increase in skill shortages. 24. One drawback with this method is that the demand and supply of workers are measured relative to the previous month, and we are not given the base that these figures start from. That is, demand may have been sufficiently low, and supply sufficiently high in the previous period, such that an adequate supply of labour remains to fulfil the rising demand. We are thus not presented with a clear indication of the level of excess demand for labour or skill shortages. • Vacancy Data

25. All else being equal, skill shortages will tend to be reflected by the duration of unfilled vacancies, and so the availability of Job Centre Plus data on vacancy duration provides a potentially useful source of information25.

24

The Report on Jobs is a monthly publication produced by NTC Research on behalf of the Recruitment and Employment Confederation, and Deloitte & Touche. 25 It must be reiterated that the use of such data is purely anecdotal, since the duration of vacancies may equally reflect shortcomings in an employers’ ability to attract suitable candidates and get them on board

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26. The relative duration of vacancies in any sector may also be useful in divulging whether the skill shortage problem represents a structural mismatch of skills, or follows the cyclical pattern of production26. In this way, it is found that skill shortages in the construction industry are procyclical27. Again, this is only anecdotal. • Supply-side data (returning to the issue of skill shortage vacancies versus recruitment difficulties)

27. The work mentioned thus far has focused purely on the demand side. These surveys suffer in their inability to isolate from the problem of skill shortages, the obstacles facing the employers in recruiting skilled labour that arise as a direct result of their own actions. The necessity to distinguish between recruitment problems that are (perceived to be) due to skill shortages and those that are due to other factors (e.g. inefficient use of job search channels) has already been well established. However, even where this has been accounted for, such as in the ESS, some uncertainty remains around the validity of the survey’s measurement of skill shortages, since attention is given exclusively to the viewpoint of the employer; the inability to attract skilled labour may result from, say, the remuneration offered being too low to attract the necessary skills. The need to examine the supply side is therefore justified. 28. One proposal is to consider the unemployment rate of the relevant occupational group (using the LFS). Skill shortages are likely to be greater when labour demand is high28, and so it follows that low unemployment rates should be a feature of a labour market with a shortage of skills. 29. Skills are themselves largely un-measurable, and the use of qualifications as a proxy is often the only way. The relationship between the two however can often be weak, with many workers in high-skilled occupations possessing few formal qualifications. This trend is changing however, and the use of qualifications to analyze the mismatch between the demand and supply of skills could be an increasingly appropriate measure (although the increase has mainly been in academic, rather than vocational qualifications). Other issues

As production increases, and the demand for labour increases, one would expect a shortage of skilled labour, as employers attempt to recruit from an already depleted pool of potential labour. This is very different to a structural skill shortage problem which persists throughout the economic cycle. 27 Ruiz, Y., ‘Skill shortages in skilled construction and metal trade occupations’, Labour Market Trends, March 2004. 28 As labour demand increases, skills are likely to be in short supply, as it takes time for people to acquire the necessary skills. This is particularly true for high skill level occupations.

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30. The NESS and ESS also provide a measure of skill gaps. These are distinct from skill shortages and reflect the deficiency in skill levels of the existing workforce relative to that needed to properly carry out the job. Skill gaps are measured by asking the employers if their employees are ‘fully proficient’. Defined in this way, the NESS found that 22% of all employers reported skill gaps, and these represented 11% of all employment. As a note of caution, since employers were found (from the follow up questions) to link proficiency to performance and the way employees applied their skills, rather than if they actually had them. Summary 31. Some of the surveys fail to distinguish between general recruitment difficulties and those difficulties that result from skill shortages. Our view is that this is a necessary distinction, and this is corroborated by the findings above. However, none of the surveys consider the supplyside to balance up the view given by employers’ on skill shortages, and as a result may not present a true picture of the extent to which there is a shortage of skills.

Niklas Percival GTN 391 22127

Copies: Rebecca Endean FDAD Clare Elliot JAD Simon Judge PUSHD Julia Sweeney FED Afsana Shukur EMD Mary Pattison EWL Elaine Squires FED Angelina Cannizzaro ELM3 Ben Ponniah ELM3 Andy Howell PUSHD Margot Hart PUSHD Rob Booth ESD Paul Mott ESD Caroline Haynes NEP Del Jenkins JAD ELMD Team Leaders Jonathan Portes WW&PD

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Annex A number of trends in SSVs emerge from the ESSs and the CBI and BCC surveys. In the long-run the number of firms reporting skill shortages is generally higher in the CBI survey than in the ESSs. 11.85% of firms on average report skill shortages in the CBI survey over the period 1999-2003, compared to 6.5% on average in the ESS and NESS surveys. The measure given by the BCC is not directly comparable to that of the CBI or ESS, the former giving the difference between the percentage of firms reporting increased skill shortage problems and that reporting less, and the latter giving the percentage of firms reporting skill shortages. However, plotting the CBI and BCC measure of skill shortages over time shows that there is general agreement between the two surveys over how the degree of skill shortages has been changing. Chart 1 Skill shortages over time
70 CBI BCC Manufacturing 60 BCC Service 50 60

50 40

40 30 30

20 20

10

10

0

0

2

2

4

4

8

4

6

0

0

6

8

2

6

2

19 8

19 7

19 9

19 8

19 7

19 7

19 7

19 9

19 9

19 8

19 8

19 8

8

0

20 0

Both the CBI and BCC surveys suggest skill shortages become more intense around 1998, before easing and then rising again in 2001.

20 0

19 9

20 0

19 9

36

4

The extent of the skill-shortage problem according to the CBI appears to have changed relatively little recently, compared to the volatile increases and decreases experienced previously (between 1972-75, 1976-81, 1987-91). The results from the ESSs support this, both in terms of the absolute amount of SSVs, and in their intensity (relative to both vacancies and employment). Results from the ESSs (for region, occupation and industry) • Regions

Chart 2 shows that skill shortages are a greater issue for some regions than they are for others. Further, the extent of the problem has changed more for some regions than for others since the first Employers Skill Survey in 1999. The West Midlands in particular has experienced a large rise in the intensity of skill shortages (in terms of total vacancies), with increases also seen in the East Midlands and in the North West since 1999. Compared to 1999, the intensity of skill shortages has decreased most significantly in 2003 in the South West. There has also been a more moderate fall in the East of England. Chart 2 Skill shortage vacancies as a % of total vacancies, by region
30.0% East Midlands

25.0% Skill shortage vacancies as a % of total vacancies

East England

London 20.0% North East

15.0%

North West

South East 10.0% South West

5.0%

West Midlands

Yorkshire and Humberside 0.0% 1999 Region 2003

Source Employers Skill Survey 1999, 2003

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The largest reported number of skill-shortage vacancies in the 2002 ESS was in the South East, although this will in part reflect the size of the region. Skill shortage vacancies as a proportion of all vacancies in the region were equal to 20.8%. In absolute terms the North had some 7,000 less SSVs than the South East in the 2002 ESS, but as a proportion of total vacancies, had 28.9%. Both regions are found to have an equal skill shortage when considering SSVs as a percentage of employment (at 0.8% each). The different conclusions that are reached when using these alternative measures is clearly illustrated in Chart 3. Chart 3 Skill shortages by region29
35.00% SSVs as a % of total vacancies 30.00% Number of SSVs 20,000 25.00% 25,000

20.00%

15,000

15.00%

10,000

10.00% 5,000 5.00%

0.00% South East North East East of England London Region South West West Midlands Yorkshire and Humberside

0

Source Employers Skill Survey 2002

In general, SSVs are more severe where labour demand (unemployment) is high (low). However, instances of high unemployment co-existing with high numbers of SSVs are found in several sub-regions, namely in London Central, East London, Birmingham and Solihull, Lancashire, Cornwall and Devon. •
29

Occupations

East Midlands and North East are missing since the low number of cases makes the results unreliable.

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The distribution of skill-shortage vacancies across occupations (and sectors) is more uneven. The highest share of SSVs exist in those occupations which require the highest level of skills, e.g. Associate Professionals 19% and Skilled Trades 19%, and these are also disproportionately high in relation to their employment and vacancy levels. This is the case for all four ESSs. Chart 4 Distribution of SSVs by occupation
% share of skill shortage vacancies 20% % share of skill shortage vacancies 18% 16% 14% 12% Percentage 10% 8% 6% 4% 2% 0% Mangers Professional Associate Prof Administrative Skilled trades Occupation Personal Sales Operatives Elementary

Source Employers Skill Survey 2002

It is important to note that this pattern is not followed when considering hardto-fill vacancies as a whole. HtFVs are mostly reported by sales/customer services and elementary occupations. This highlights the need to distinguish from simply hard-to-fill vacancies (which may result from poor recruitment practices), those that are hard to fill due specifically to skill shortages. Excluding Associate Professionals and Skilled Trades, the intensity of skillshortage vacancies (relative to employment) is somewhat higher in occupations where the required skills are relatively modest (operatives and elementary occupations) than in managerial roles where the skill levels are high30. • Industry

For elementary occupations, SSVs as a percentage of employment was calculated as 1.7%. This is compared to 0.2% for managers (and 0.6% for operatives). However, a large number of elementary occupations vacancies reported by one respondent means that this figures should be treated caution.

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Consideration of skill shortages by sector shows that to the extent that a skills shortage problem exists, it has been concentrated largely in the construction industry. This sector has only represented 4% of employment, and (by virtue of this fact) has slightly fewer skill-shortage vacancies than other larger industries, but the intensity of the problem (for either measure) has been far bigger, with 48.4% of all vacancies classified as SSV’s, which account for almost 2% of employment (ESS 2002). Chart 5 SSVs by industry, 2002
60.0% SSVs as % of total vacancies SSVs as % of employment 50.0%

40.0%

30.0%

20.0%

10.0%

0.0% Manufacturing Construction Retail Transport Finance Public Education Health

Source Employers Skills Survey 2002

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To:

Mr Fitzner DTI Ms Cottrell HMT Mr Kelly HMT Mr Butcher DfES Mr Thompson DfES Mr Elliott DfES Mr Werner ONS

From: Niklas Percival DWP
Employment, Jobs and Geography Economy and Labour Market Division GTN (391) 22127

Date: 01/09/2005 Cc: Mr Wells DWP Mr Portes DWP Mr Zimmern DWP Ms Pereira DWP

Issue 1) A series of papers we have done have analyzed what labour market indicators suggest about the development of skill shortages since 2001, first at a national level, and then across different occupations. Attached is a paper which brings together that analysis.

Timing 2) For your information Background 3) Skill shortages have typically been assessed through employer surveys such as the Employers Skills Survey, the BCC Quarterly Employers Survey and the CBI Industrial Trends Survey. The analysis of labour market indicators is intended to provide a supplement to these surveys. 4) The main points from this analysis are a) Despite employment growing and unemployment at record lows, labour market indicators do not provide strong evidence of labour/skill shortages developing at the national level. b) At the major occupation level, the indicators are consistent with recruitment constraints in Plant & Machinery occupations only. However there are many people flowing between this and every other occupation, suggesting there are many people in the labour market with the skills required to for this occupation. The same is also true for all other occupations. c) Amongst the minor occupations, the indicators find some evidence of recruitment difficulties only for Assemblers and Routine Operatives and Elementary Cleaning occupations. However, these do not appear to reflect skill shortages. Even at the minor occupation level there are many people flowing between all occupations. 5) Please direct any comments or questions you have to William Zimmern.

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Leadership and Management Advisory Panel UK LEADERSHIP AND MANAGEMENT: EVIDENCE AND ACTIVITY This paper attempts to summarise the evidence about the state of Management and Leadership in the UK and to highlight some of the activities and interventions that are currently being used to address the issues identified and/or to build on current best practice. The paper is not intended to be exhaustive and the Panel will of course draw its own conclusions on what further information it requires to carry out its work and also what, if anything it wishes to say about the various activities highlighted in the paper. However the following issues might provide a focus for discussion: o The need to find ways of encouraging innovative and inspired management cultures o How a better focus might be given to the various activities currently being undertaken both nationally and regionally o The need for simple, accessible and well validated diagnostic tools to enable leaders and managers to reach conclusions about there development needs o The importance of mentoring and coaching as key management development tools

John Baker DTI Management, Leadership and Skills Unit October 2005

EVIDENCE Perceptions of the general quality of UK management The importance of management and leadership skills has long been recognised, with concerns over the UK’s performance in this area dating back at least a century. This concern has continued right up to the present day, with the most recent evidence of Government concern about management and leadership coming in the recent Skills White Paper,31 where it was announced small businesses will have access to management and leadership training through the auspices of the National Employer Training Programme. Various authors have mentioned the lack of hard data on management and leadership skills. There are several reasons for this, but one persistent problem is the difficulty of definition. The UK has traditionally had a far wider definition of managers than most other countries, making international comparisons problematic. Another question is what levels of organisations are included in the definition. In 2003, the DTI and the Economic and Social Research Council (ESRC) commissioned Professor Michael Porter and Christian Ketels to investigate the current state of UK competitiveness. In their report,32 Porter and Ketels looked at the evidence on the quality of UK management, as a major contributory factor to productivity and competitiveness. In their review of the literature, they found that the UK is believed to have relatively high levels of professional management, as opposed to management by the owner’s family and also that compensation techniques are used more widely than elsewhere, excepting the US. However, they came across some evidence from the manufacturing sector that the UK adopts modern management techniques later and less often than its competitors. Porter and Ketels also noted that the UK has a relatively low share of managers with advanced formal qualifications (although this could be simply because the definition of management is broader in the UK than elsewhere) but that the supply of skilled managers in the UK is likely to be very competitive. The problem, as they saw it, appeared to be concentrated at the lower and middle management levels, reflecting the UK’s overall skills deficit. However, this conclusion was tentative. It is also worth noting that the International Institute for Management Development (IMD) takes periodic surveys of business executives’ perceptions of the quality of management. Consistently, since 1996, the UK has ranked fifth out of the G8, behind Canada, Germany, the US and France and a recent study33 of the manufacturing sector by McKinsey/LSE found the UK had a lower average score for a management index compared to the US, Germany and France, although there is a wide distribution of scores within
31 32

Available at: http://www.dfes.gov.uk/publications/skillsgettingon/ DTI Economics Paper No.3, available at: http://www.dti.gov.uk/economics/paper3-porter-ketels.pdf 33 Bloom et al., 2005, available at: http://cep.lse.ac.uk/management/management.pdf

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each country. The same study also finds an association between management scores and various measures of business performance. Following the Porter and Ketel’s review of UK competitiveness, the Advanced Institute of Management (AIM) conducted a systematic review34 of the literature on adoption of best practices in the UK which confirmed that there is a poor level of adoption of promising practices in UK organisations in the manufacturing sector (e.g. Total Quality Management and Supply-Chain Partnering). It noted there is a lack of evidence for other sectors. The AIM report identified the level of management knowledge as a key driver for the adoption of best practice, referring specifically to top management and executive training and attendance of management at workshops and professional events. The main finding of the review was, however, that there is no such thing as a “one size fits all” best practice. The adoption and application of best practice is subject to the interactions of institutional factors (e.g. supply chain dynamics, technological drivers, regulation) and circumstances (e.g. need, critical events, opportunities and whether they fit in with the firms’ improvement plans). In view of the complexity of the process of adopting best practice, the review noted that it was not clear how UK companies differed from major competitors in the management of adoption efforts. The AIM review also noted that if UK firms did lag behind competitors in terms of adoption of best practices it was not clear whether this was due to weaknesses within firms or whether it was due to external factors such as the dynamism of the environment or the macro-economic context. The Porter and Ketel’s review also makes a similar point: “Management and its decisions are both an input and a result of the business environment. Thus UK management performance in many ways either reflects weaknesses in the business environment or involves decisions that are consistent with the current business environment even though they do not improve competitiveness. A number of commentators have also suggested that UK managers adopt less effective corporate strategies. Porter & Ketel’s argue that UK companies compete less on unique value and innovation than other advanced countries even when there are good business reasons for them doing so. “UK managers might either fail to understand the opportunities of competing in premium segments, or might indeed be better at low cost processes, products, and services”. The concern here being that in light of rising competition from firms in lower cost economies, such a strategy can only be sustained by off shoring low value added activities. What types of skills are really needed and how can they be developed? It is often said that management skills are difficult to define. Core competencies vary with level and type of responsibilities undertaken, as well
34

Bauer et al 2004

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as the nature of the industry. However the National Occupational Standards offered the following definition as a starting point: " Managers and leaders provide direction, gain commitment, facilitate change, and achieve results through the efficient, creative, responsible, deployment of people and other resources." When you break this down further the following skills are highlighted in the literature: Generic Skills: It is important to note that “management skills” as a specific category of generic skills, are no longer restricted to those in ‘Manager’ occupations. Evidence for this can be taken from the findings of the 2003 National Employers Skills Survey, where communication, team working and problem solving were identified among key areas of skill shortage. Influencing skills are also increasingly important in workplaces with higher levels of employee involvement in decision-making. Customer Relations: In a survey by the Chartered Management Institute35, managers rated customer relations the most important determinant of organisational success in the future. Customer handling was also a skill viewed by employers to generally be in short supply in the NESS 2003. Managing Change: The ability to adapt to rapidly changing environments and growing commercial pressures is becoming increasingly important for managers. Managers face more fragmented and global product markets and technological transformations are changing products, possibilities as well as patterns of work. Managing change is identified as one of the most important skills to have in the CMI survey. Leadership and Strategic Thinking: Kettley & Strebler (1997) argue that senior managers need to think strategically, analyse information, solve problems and make decisions. While their importance may increase with seniority, the ability to cope with change, to make strategic decisions and willingness for continuous learning are expected from most managers. Leadership, on the other hand, not only requires strategy and results but also the ability to engage others in sharing and pursuing the vision being targeted. This requires the trust and respect of the team and good working relationships within it. 36 What is being done to develop these skills? Education: Although management skills depend in part on the innate ability of an individual, the need to think strategically means that it is important for managers to start with a good level of education and general knowledge. Institute of Employment Studies analysis of LFS data shows a steady increase in the qualification levels of managers in common with the rest of the
35 36

Mabey & Thomson 2001. Inspired Leadership, DTI & CMI 2004

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working population. The proportion of managers with a degree increased from 23 per cent 1996 to almost 30 per cent by 2001. Furthermore, the percentage of individuals with degrees is rising faster among managers than nonmanagers. The qualification levels of UK managers seem to be broadly comparable to managers in other EU member states. There has been an expansion in the number of MBA programmes on offer as well as the number of graduates with MBAs. However while MBAs have become an important route for training current and future managers, the number of MBA graduates is very small compared to the total number in managerial occupations. And UK MBA activity is low compared to the USA. Below HE level, the data seem to suggest that management qualifications (diplomas and certificates) offered by awarding bodies are in higher demand than management NVQs. This may reflect a lack of confidence in the use of the competence-based approach employed by NVQs for management development. It is however worth noting that management units of NVQs have been and continue to be imported into other NVQs with a higher degree of take up Johnson & Winterton summarised the difficulties of using competence-based approaches to management development in their Skills Taskforce Research Paper on Management Skills. Ongoing formal training and development: The United Kingdom has a high incidence of job related training (over 50% of employees estimated to have participated in some form of job-related training in the year 1994/95 compared with about 46% in the US). Among managers, 67% of all those in the UK participated in job-related training in that period compared with about 61% in the US. The average duration of training in hours per trainee is however similar to the US. Managers also seem to be taking their own training more seriously. Off-thejob training in the manager’s own time rose from 3.3 days on average in 1990 to 4.9 days in 2000. The CMI’s 2001 survey of management attitudes to training and development indicated that, as far as development methods for the future were concerned, on-the-job training was the preferred method, followed by external courses/seminars. Experience: Employers generally seek experience and use informal training. The National Employers Skill Survey 2003 found that the greatest proportion of skill gaps were ascribed by employers to managers lacking experience (61% said this) followed by a failure to train (35%). People in management positions are more likely to have a longer period of continuous employment to acquire experience. For example, over 40% of managers and administrators have been continuously employed for more than 10 years. This compares with less than 30% for those in other occupations. ACTIVITY Standards

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New Management Standards - New world-class management and leadership occupational standards were launched in November 2004. They have a range of uses in human resource management, learning provision, personal development and qualifications. The Skills for Business Network is leading work to implement the standards. IIP (see also Diagnostics). The revised IiP Standard developed by IiPUK and launched in November 2004 has a strong focus on leadership and management. There are 10 business improvement principles, 2 of which identify what an organisation needs to do to lead, manage and develop people effectively, along with the associated knowledge, skills and behaviours. It also enables organisations to establish how increasing skills can improve the performance of individuals and the productivity of the organisation. Research undertaken by IiPUK in August 2004 showed that SME organisations recognised with IiP increased their profit by £452 per employee more than non-recognised SME organisations. The survey also showed that IiP organisations invest more in training than non-IiP organisations and see larger profits as a result. Over 50,000 SMEs are working with the Investors in people Standard, including 20,000 employing between 5 and 49, who engage with IiP over the last 2 years as a result of the £30m Small Firms Initiative. Action Learning Action Learning for Leaders – Action learning sets are being piloted which address real but strategic business problems faced by small business owners/managers within a facilitated peer group setting. The participants are then encouraged to return to their organisations, apply the learning and report back to the group on progress. Learning sets are being held in Glasgow, Nottingham and Guildford and a full evaluation will be used to refine the process for further learning sets to be delivered next year. A best practice guide will be based on the lessons learned. Selected Formal Qualifications The Skills for Business Network is working with Foundation Degree Forward to develop a foundation degree and with QCA and SQA to develop a generic management and leadership qualifications framework. The Chartered Manager, launched by the Chartered Management Institute in 2003 is a significant contribution to the promotion of management learning and professional standards. The Chartered Director – The Institute of Directors, which represents some 53,000 business leaders in the UK, is working with leading industry associations and institutes to raise the bar in governance and professionalism among their senior members and provide a tailored route to qualifying as a Chartered Director. This is now widely recognised as the professional qualification for directors. It is particularly valued by those already professionally qualified in a vocational role, such as Chartered Accountant or

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Chartered Engineers, who are faced with a whole new set of broader challenges in the boardroom. [NB: Must be an IoD Member or Fellow to be eligible]. Signposting and/or Online Support The Small Business Service (SBS) is funding the development of a diagnostic tool initially aimed at SME owners and managers, which will enable users to identify their development needs on line. It will be sited on Businesslink.gov and be freely available. It will generate a personal development plan and will signposts users to providers who can meet their needs. It is hoped to have this in place by end of 2005. (also Diagnostics, below) Solutions4Business - The Skills for Business Network – a web-based service aimed at the small business owner/ manager and their trusted advisors, which addresses real business problems. The solutions provided are in the process of being contextualised on a sector-by-sector basis. The Local Government Leadership Centre (LGLC) works with authorities in England to develop the quality of leadership among political leaders and officers. It will act as a broker between Local Authorities and providers of leadership development and also provide independent advice to councils about their leadership capacity, and how best to develop it. Diagnostics Programme to Boost Leadership and Management Skills of managing Directors of Small Businesses - In March 2004, the Government launched a scheme to help Managing Directors of businesses employing 20-250 people, improve their management and leadership skills. Each MD gets a free diagnosis of their development needs and up to £1000 to support learning tailored to their needs. The emphasis is on informal learning, peer support and on the job coaching as well as more formal provision. This was first launched in selected areas and rolled out nationally in September last year. It is expected that by March 2008, 17,000 SME MDs will have benefited from the programme. IiPUK/LSC – IiPUK are currently working with the Learning and Skills Council to develop a self-assessment tool that can be used by organisations to identify both their business improvement and related skills needs. This on-line diagnostic will link into other diagnostics and sources of information such as the LSCs Guide to Good Practice and the SSDAs Gateway. It is being piloted from October 2005 and will be available nationally from April 2006, by which time a number of sector specific models will have been developed in partnership with SSCs. It is intended that the IiP diagnostic will be one of the support tools used by brokers to identify NETP solutions and will be offered to those involved in the Leadership and Management Programme to help them develop their businesses.

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Inspirational leadership – An Inspired Leadership Diagnostic is being developed by DTI. This is based on research carried out by DEMOS, CMI and itself and provides individuals with a practical benchmark for outstanding leadership. A fully validated tool is planned for launch in March 2006.

Mentoring and Coaching ACAS Model Workplace - In October ACAS launched their ‘Model Workplace’ a culmination and distillation of 30 years of experience in British workplaces. The base of the model is 11 key principles and practical features that ACAS believes make a ‘model workplace’. The booklet has been designed to be a business self-help tool, easily accessible and simple in language and tone. As part of the model’s launch, ACAS are also running a number of bespoke training sessions for businesses – particularly SMEs – to look at the practical ways managers and their staff can achieve the ‘model workplace’. Northern Way – One North East, Yorkshire Forward and North West Development Agency are developing a Leadership Academy to work jointly to address the core priority issue of Leadership and Management, as identified by nearly all RSPs as a major productivity driver. East Midlands Development Agency (EMDA) - produced a report in March 2005 entitled ‘High Growth Business Coaching – Helping businesses throughout the UK to meet the challenges of rapid growth’. The report argued that any targeting of SME coaching, within the context of overall Business Link business model should be by sector, technology, size or age criteria. The report proposes a framework to stimulate provision of coaching equally appropriate to ambitious start-ups and to existing businesses with high growth potential. Work is currently underway with RDAs, Treasury, DfES and DTI to consider whether the EMDA model is one that can be more widely developed and applied. The Campaign for Leadership (the Work Foundation) - exists to improve the performance of individuals and organisations by focussing on practical solutions that bring out the best in people. They run both tailored in-house programmes - working with a wide variety of individuals, teams and organisations through out the UK and Europe, transforming their leadership, influencing and communication skills by designing and delivering leadership programmes around specific organisational issues; and Open Leadership Programmes - based on extensive research and experience of leadership at work, bringing together influential leaders from a wide range of industries and sectors. The Campaign provides several levels of leadership development to support, advise and educate leaders throughout their careers, offering lifelong support through follow up reviews, providing world-class guidance, coaching and mentoring. Multi-facetted Programmes

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National School of Government - A number of public sector initiatives are well advanced. As part of public sector reform, the Cabinet office has carried out a stock take on leadership in public services and is committed to building stronger and more visible leadership. Following on from the work of the Centre for Management and Policy Studies which delivered a senior executive programme for civil servants and other public servants a new National School of Government (launched in June 2005) has been created to support the business priorities of Government. It will take on the role of promoting closer working with similar learning organisations elsewhere in the public sector and build relationships with academic institutions, professional bodies and business schools in order to ensure that public servants have access to the best possible leadership and management development. It will also have a key role in delivering critical leadership development programmes. In April 2004, ACAS entered into an official partnership with the National Council of Voluntary Organisation (NCVOs) to develop good management & employment practices in the voluntary sector, as well as contributing to the NCVO’s ‘Workforce Development Hub Group’ (with the CIPD, TUC, Cranfield Trust, and BME representative organisations) to look at ‘opportunity’ issues in this sector and how to raise the game of its leaders and managers. We have played a central role in the writing of the NCVO’s new guide to ‘employment in the voluntary sector’. Following the Treasury's 2002 cross cutting review "The Role of the Voluntary and Community Sector in Service Delivery" the Active Communities Unit at the Home Office commissioned a skills strategy for the voluntary and community sector. A workforce development “Hub” has been established and HO Ministers are considering whether a separate leadership centre is needed. Leaders UK is a joint venture between the Cabinet Office, CBI, NHS, local government, the criminal justice and education sectors, the Association of Chief Executives in Voluntary Organisations and the Association of Chief Police Officers. The National College for School Leadership - The National College for School Leadership has been operating since November 2000. The Centre for Excellence in Leadership, the new leadership college for the learning and skills sector (which includes FE Colleges) was launched in October 2003. The Leadership Foundation for Higher Education was launched in March 2004 under the auspices of Universities UK and SCOP with funding from the four UK HE funding bodies. From July 2005 the work of the NHS Leadership Centre and the NHSU was absorbed into the new NHS Institute for Innovation and Improvement. Leadership development is a priority for the new Institute. Well-established

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arrangements for leadership development are in place for the police and defence services. In the area of local government the joint LGA/ODPM Capacity Building Programme (which aims to support improvement through local government, including councils' leadership and skills) and the Local Government Leadership Centre (LGLC) has been established and running programmes such as: Advanced Leadership Programme - Intense course, consisting of three phases aimed at Senior Managers to improve management and leadership in local government Future Leadership Programme - This new programme for middle managers aims both to develop individual middle managers as well as to address organisational capacity through a challenging and innovative programme Fast Track Leadership is geared to the needs and interests of young councillors. It is aimed at young councillors under 35 who have been recommended by their local authority. The Leadership Academy and Leadership Academy Black, Asian & ethnic minority programme Both aimed at Cabinet Leaders and/or Experienced Members Modern Members - a bespoke programme available to all councillors who wish to learn more about specific aspects of local government The Top Teams Leadership Programme, which recognises that leadership, is a team issue. It is not just about one team but two, the leading elected members and the chief officers Accelerated Development Programme - developing talented employees with at least two years' local government experience and the potential to be senior managers A National Graduate Programme

8.Activity in specific Regions include: Leadership & Management identified as a core priority by nearly all Regional Skills Partnerships and each is now developing a strand of work to address this major productivity driver. There is also evidence that the Regional Development Agencies are beginning to share best practise and to work together to better address this issue. For example Northern Way: ONE, Yorkshire Forwards and NWDA developing a Leadership Academy to work jointly to address this complex issue. EMDA produced a report in March 2005 entitled ‘High Growth business coaching – Helping businesses throughout the UK to meet the challenges of rapid growth’.

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The report argued that any targeting of SME coaching, within the context of overall Business Link business model should be by sector, technology, size or age criteria. The report proposes a framework to stimulate provision of coaching equally appropriate to ambitious start-ups, and to existing businesses with high growth potential. Work is currently underway with RDAs, Treasury, DfES and DTI to consider whether the EMDA model is one that can be more widely developed and applied. Recommendations are expected early autumn 2005. Other regional Multi-facetted activity includes Advantage West Midlands - Developing an L & M project as a key piece of work for the RSP, initially concentrating on leadership and entrepreneurship. A Pilot project: running from July 2005 – March 2006 will o o o o Establish network of up to 20 specialist L, M and E skills advisors Establish portfolio of L, M and E skills interventions. Address gaps in provision of coaching and mentoring Build capacity of general business advisors so appreciate relationship of investing in L, M and E skills and improved business performance.

One North East - High-Level Strategic Task Group will be established to drive work forwards. Activities will include: o Mapping of all current provision o Identification of gaps in provision o An evaluation of the regional programme for Management and Leadership Development funded by the Learning & Skills Council and managed by Business Link for Northumberland o Build on SSDA successes and work to date. o Evaluation of business impact of L & M development. Northwest RDA - L & M and Entrepreneurship development identified as key priorities for RSP. Work to date includes: o Research with 19 priority sectors shows L & M development is a major issue limiting growth for over 52% of the sectors. o £4.5m invested in Lancaster University to develop their Leadership Centre – regional flagship o LEAD programme funded with Business Link to deliver programme for micro businesses utilising the Leadership Centre, includes coaching and mentoring, consultancy, Master classes, Residential courses and Job swaps Southeast RDA - Building on an investment of £2m spent over the last 2.5 years on a pilot project aimed at creating “World Class Managers and Leaders for a World Class Region.” Activities clustered around, research, dissemination and delivery

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Southwest RDA - Major project in hand to identify the most effective ways of raising demand for leadership and management skills training in SMEs across different sectors (10-250 employees). Specific objectives of M & L Strategy: o To identify how the learning infrastructure can respond to increasing demand, taking into account the long lead in time to see change in formal provision at colleges and Higher Education Institutions. o To develop a quality assurance framework for the supplier of leadership and management learning o To identify further leadership and management opportunities in key economic sectors. o To target, where appropriate, people from under-represented groups e.g. Black and Minority Ethnic groups, women in management, people with disabilities and asylum seekers. o To target a number of social enterprises and community organisations/networks involved with Local Strategic Partnerships and Local Government organisations o To prove the worth of leadership and management ultimately without the need for public subsidy London Development Agency - London Management and Leadership Group formed to: o Co-ordinate current Management and Leadership provision in London to offer a consistent and coherent programme of support that complies with the new National Occupational Standards (NOS) for Management and Leadership. o Link business focused demand with effective supply. o Support providers in offering front end diagnostics and training advice to employers. o Develop services for those businesses not currently able to directly access public sector support (i.e. COs that employ between 5 and 19 employees).

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SKILL SHORTAGES RESEARCH
Statistics on skill shortages vary enormously. The main point to note is that some measures are just based on whether a firm reports any skill shortages. So a very large firm with 1,000 employees could respond “yes” even if it just had one skill shortage vacancy or one worker lacking the skills required. Sample sizes also vary greatly. The incidence and intensity of skill shortages appears lower in the Employers Skill Survey, which is also the one with the largest sample. Federation of Small Businesses The FSB has 185,000 members covering 1.25 million people. It aims to protect and promote the interests of the self employed and owners of small firms Press release, April 2005
The FSB today unveiled the fourth of its six key principles for a general election year, warning candidates that despite numerous government initiatives businesses still cannot find employees with the technical skills they need. Feedback from the FSB’s 185,000 members has revealed that in addition to concerns about the skills levels of existing employees, 36 per cent of small firms find it difficult to recruit skilled staff. Training is the obvious response to these skills gaps but many formal courses are not relevant to businesses’ needs. Britain’s biggest business organisation is calling for a sustained investment in skills to boost productivity. The FSB is urging politicians to provide funding for flexible packages so that training can take place in the workplace at convenient times.

Ernst & Young Findings from their 6th annual Enterpriser Survey, released December 2004:
77% of the entrepreneurs polled believe there is a skills shortage in their industry, with 52% claiming this has negatively impacted their business. This is even more significant given the importance entrepreneurs place on their teams in order to achieve success:
Do you believe that there is a shortage of skills in the UK workforce and has it affected your business? I don’t believe there is a skills shortage in my industry There is a skills shortage but it has not had any impact on my business There is a skills shortage and it has had a negative impact on my business DK/NO 21 25 52 *

What prevents your business from responding quickly and efficiently to new market opportunities and increased competition? Fear of failure Finding the right people Focus on long term plans Investors/shareholders Lack of funding Lack of innovation Limited market knowledge Red tape and bureaucracy Nothing: my business responds quickly and efficiently DK/NO 7 45 5 8 35 5 11 33 21 1

What do you consider to be the most important attributes that have or will contribute to your success as an entrepreneur? Select 3. Ability to select the best people Dedication to the business Determination to succeed Energy and enthusiasm Innovation and ability to spot new opportunities Leadership Risk-taking Sense of humour DK/NO 53 19 51 43 45 49 26 8 *

How do you differentiate your business from your competitors? Please select 3 maximum. Ethics and values Flexibility and speed to market International presence Innovation in products and services People Price Stable returns for shareholders Strong relationship management Strength of brand Find it difficult to differentiate 36 45 13 49 62 18 3 33 30 1

417 of the UK’s top entrepreneurs were interviewed in depth about their views on the Government, the challenges of being an entrepreneur, their intentions over the next 12 months, how they intend to fund expansion and what keeps them awake at night. Ernst & Young’s Enterpriser Survey focuses solely on leading entrepreneurs and has become regarded as the biggest survey of its kind in the UK. The survey was conducted by Lighthouse Research in November 2004 on behalf of Ernst & Young.

British Chambers of Commerce Quarterly Economic Survey This is a weighted survey based on up to 8,000 companies employing up to 1 million employees. Statistics are presented as “balances” i.e. the percentage balance of firms reporting higher levels of recruitment difficulties minus those reporting lower levels. It makes more sense therefore to examine the statistics as a time series to look at how

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these balances are moving over time. Figures are given by industrial sector (manufacturing and services) and firm size.

85 75 65 55 45 35 Manuf Services

20 02

20 03

20 04

http://bcc.system7.com/YXQxT0E.html

CBI Quarterly Industrial Trends Survey A weighted survey based on around 1,000 firms. Respondents report on the factors that are likely to limit manufacturing output. Orders/sales is the most commonly reported factor by firms, although skilled labour is often cited. Responses appear to follow the economic cycle with the response rate citing skilled labour falling during the early 1990s (just under 30% in 1988 to about 5% in 1994; then a gradual upward trend to just under 20% in 2002). Reed Skills Index Small quarterly survey of between 500 and 1,500 establishments. A July 2003 report found that 53% of public sector organisations report shortages of suitably skilled job applicants (8 percentage points higher than non public sector). Employers Skill Survey 2001 % estab with vacancies % estab with hard-to-fill vacancies % estab with skill shortage vacancies Vacancies as % of employment HFV as % of employment SSV as % of employment % estab with skill gaps Skill gaps as % of employment % estab providing training 14% 8% 4% 3.7% 1.7% 0.8% 23% 9% 2003 17% 8% 4% 3.1% 1.2% 0.6% 22% 11% 59% 2004 18% 8% 4% 3.0% 1.1% 0.7% 20% 8%

20 05

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Source of information on skill shortages: http://www.statistics.gov.uk/cci/article.asp?id=208 GE Commercial Finance Survey of 400 small and medium sized firms. More than two out of five said that finding skilled staff was a major concern. For Germany the figure is fewer than one in five.

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To: GERRY SUTCLIFFE From: Emma Knox Management, Leadership and Skills Unit, Innovation Group BPR 148 Tel: 020 7215 1109 20 January 2005

Ci: Gerry Miles – BR/MEMP Edward Barker – IG DDG Jane Hall – IG DDG Brian Greenwood – BR/MEMP David Rose – BR Information Hub Phil Bennett – BR Information Hub Steve Loades – IG DDG Steve Roper - DfES

DRAFT SPEECH & BRIEFING FOR THE ALL PARTY PARLIAMENTARY GROUP (APPG) FOR THE STEEL AND METALS-RELATED INDUSTRIES MEETING ON SKILLS GAPS & SHORTAGES Issue Speech and Q&A session at the APPG for the Steel and Metals-Related Industries meeting on skills gaps & shortages. Recommendation That you consider the attached draft speech at Annex 1 and note the briefing for the Q&A session at Annex 2 and the background briefing is at Annex 3. Timing Routine, but the speech is to be given on Monday 23 January. Background You have agreed to make a 5-minute speech and participate in a question and answer session at a meeting on skills gaps & shortages co-hosted by the APPG for the Steel and Metals-Related Industries and the National Skills Forum. Skills gaps – lack of proficiency of existing employees. Skills shortages – vacancies that are hard to fill for skills-related reasons (e.g. lack of relevant experience or qualifications). Your short speech will follow one by Phil Hope. This will then be followed by a Q&A session. As you have to leave the event early at 7:30-7:40pm, Gerry Miles – Director, Business Relations Materials, Engineering and Manufacturing Policy, has agreed to respond to any questions posed after you have left.

The event will have an audience of approximately 20 people made up of MPs, skills agencies, Corus, the Cast Metal Federation and the Metal Forming Association. The APPG for the Steel and Metals Industry is chaired by Adrian Bailey MP. DTI Ministers have regularly participated in meetings of the Group. Most recently, Malcolm Wicks took part in a well-attended discussion on Energy Policy just before Christmas.

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Annex 1

Draft speech for the APPG for the Steel and MetalsRelated Industries meeting on skills shortages Introduction – Challenge of Globalisation
•

Globalisation is producing key challenges for the UK economy. We need to respond by competing on the basis of value added, high skills and innovation.

•

The DTI is committed to creating the conditions for business success in the UK. And to helping UK businesses respond to the challenges of globalisation.

•

Manufacturing in the UK is vital to our economy, and the Government is committed to providing the right macroeconomic conditions and support to ensure that British manufacturing companies continue to successfully compete in world markets.

Importance of Skills
•

Skills are an important driver of productivity. And skills development is crucial to ensuring that UK businesses are competitive and the nation’s prosperity.

•

The knowledge economy demands a more highly skilled workforce, from intermediate to the highest
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graduate level, and high value jobs. We have to respond.
•

Skills gaps and shortages prevent businesses from growing and becoming more productive and profitable. One third of businesses that report skills gaps say they are preventing them from modernising their business to move into higher value added economic activity. And they are preventing them from becoming more productive.

Metals-Related Industries • The metals industry and the materials sector are the backbone of manufacturing in the UK. Contributing 15 billion pounds of extra value to the UK economy. And employing 471,000 people.
•

The industry has been though some tough times in recent years. We know it has been painful for those affected and the communities in which they live.

• But over the last four years we have witnessed perhaps the biggest rise in global demand for materials that we’ve seen in living memory. Largely on the back of

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startling growth in economic activity in China and other economies outside the Western World.

Action to Address Skills Challenges • Yet - because of the investment in skills innovation we're now making metals products that the world wants to buy.
•

I would like to congratulate the UK metals industry for its resilience and efforts to keep pace with the everchanging demands of a modern economy.

•

I know that there is much going on to address the skills challenges in the metals sector.

•

Metals Industry Skills and Performance – MetSkills for short – aims to ensure that metals companies have the right people with the right skills, in the right place at the right time.

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I am encouraged that Metskills has now merged with SEMTA to form one of the largest Sector Skills Councils in the UK. This will increase employer influence and help maximise the external resources and funding available to the industry.
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•

I am also pleased that last year the Corus Swinden Technology Centre entered into a long-term tie-up with the local Learning and Skills Council, which has moved on to the Swinden site to become part of the National Metals Technology Centre.

•

With Learning and Skills Council funding and the increase in support from South Yorkshire Objective One and Yorkshire Forward, this major integration of facilities will deliver an extensive high level technical training programme, targeted to meet the needs of the metals and manufacturing industry; providing both technician and graduate level training and development.

Role of Trade Unions
•

I would also like to mention the key role played by trade unions in building a strong and successful metals industry in the UK, at companies such as Corus and Alcan.

•

By helping to spread best practice in workplace performance. By helping to raise skill levels across the workforce. And by forging the partnerships with

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Government and steel producers that are necessary to secure the long-term prosperity of the sector.
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Unions play a valuable role in encouraging employees to learn – particularly for those who have not previously engaged in training.

Conclusion – Importance of Partnership Working
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Investing in the skills and training necessary to create and grasp new opportunities is a shared responsibility of government and business, from which the entire economy benefits.

•

We – Government, business and unions – must work in partnership to drive up the UK’s skills levels.

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Annex 2 Briefing for Question and Answer Session Engineering graduates in the metals industry
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UK metals industry is in the best position to present its companies and activities in a more positive light and to dispel the outdated image of the sector as a "traditional industry”

•

Through the joint industry/Government led Manufacturing Forum, we have been focusing on the image of manufacturing more generally. The Forum is taking forward a National Communications Campaign to change perceptions about manufacturing. And we will be creating a Manufacturing Day as part of Enterprise Week in November 2006. The metals industry, through the EEF, will have a major part to play in ensuring that this initiative is a major success

Promoting Engineering
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The number of young people choosing engineering degrees has fallen. The Government is supporting a number of initiatives aiming to address this: o The Government’s Specialist Schools Programme plays an important role in encouraging more young people to study engineering, science and technology and to take up post-16 courses in these areas in both further education and at university. This programme allows schools specialising in engineering to enable young people to fulfil their potential in engineering.

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o Worked with the Wellcome Trust to create the network of Science Learning Centres to improve science teaching by providing teachers with better Continuing Professional Development. To address the fact that not all science teachers feel they have the skills to teach specialist science subjects post 16 o Continuing to actively support the delivery and embedding in the curriculum of the Engineering GCSE Double Award, as well as GCSEs in other vocational subjects. o Support the Science and Engineering Ambassadors’ scheme through which offers teachers the assistance of inspiring role models who actually use their skills in science, technology, engineering and mathematics in their careers, and who can communicate their passion for these fields to young people. Over 10,000 SEAs are now inspiring young people with their passion for science and engineering.
•

Need to show young people that engineering and technology are part of the ‘new economy’ and not part of the old one.

• DFES data suggests that success rate for engineering and technology technician level courses is rising from 57% in 2001/2002 to 62% in 2003/2004

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Recruiting outside “tradition” labour pool for sector
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Due to the UK’s ageing population, the sector cannot rely on tradition flows of young people entering the labour market. Better use must be made of the talent that exists in the current workforce. Need to look to train and re-train those already in work.

•

Need to tackle traditional stereotypes. Women and ethnic minorities making up an increasing proportion of the workforce. If sector only recruits from traditional labour pool will be missing out on this potential.

•

Currently 75% of women with science, engineering and technology degrees are not taking up in jobs in this sector. 95% of engineering graduates are men.

Manufacturing Skills Academy
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Employer-led Manufacturing Academy will be one of the first four National Skills Academies to move to a business planning phase.

•

Phil Hope has asked SEMTA to form two employer-led groups to pull together the business plan. Expected that business planning stage will take around six months. Aim is to launch the Manufacturing Skills Academy around September 2006.

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• It will simplify skills delivery and drive up the quality of course content, teaching and assessment to globally competitive standards. • It will be affordable for both large and small manufacturing companies, and be accessible in every region. Skills
•

Sector Skills Councils are developing Sector Skills Agreements to articulate employer demand and shape the supply of skills to meet this demand.

•

Regional Skills Partnerships have been set up to bring together national, sectoral and regional priorities. They provide a mechanism for determining, region by region, the priorities for economic development and skills linked to the Regional Economic Strategies.

•

Train to Gain (the National Employer Training Programme) from April 2006 will be a demand-led mechanism with training built up to deliver employers’ business needs. Offering: o Independent, impartial brokerage & diagnostic service; o Training designed and delivered in a way that meets employers’ needs; o Free skills training up to Level 2; and o For small firms, wage compensation for low-skilled employees in 2006-7 and 2007-8

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• £20 million available for 2006-7 and 2007-8 to pilot offering Level 3 (technician level) support as part of Train to Gain • Support Foster Report’s conclusion that FE colleges should concentrate on delivering the academic and vocational skills the economy needs Apprenticeships
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Apprenticeships are a well understood and valued training route and the Government is strongly supportive of them.

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Sector Skills Councils are reviewing the design and content of Apprenticeships in their sector to meet employers’ and learners’ needs.

•

Seeking to increase the diversity of the apprentice workforce will have significant business benefits and will play an important role in addressing the changing demographics of the UK.

Support from RDAs
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Business support within regions varies due to differing priorities in Regional Economic Strategies – these are consulted on and agreed. The extent to which additional funding is available to a region (e.g. from European funds) also makes a difference.

•

However, a core level of support should be available in all regions, e.g. Information and advice from Business Link.

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Annex 3 Background Briefing
The APPG for the Steel and Metals Related Industry The All Party Parliamentary Group (APPG) was set up in 2002. Chaired by Adrian Bailey MP (Lab – West Bromwich West), the APPG brings together Members of Parliament and Peers with steel and other metals interests. It aims to represent the interests of UK steel producers, their employees and their communities. It is supported by UK Steel, trade association for the UK steel industry; Community, the steel trade union and trade unions representing other parts of the steel and metal industries. In 2004 it was extended to include cast metals, in association with the Cast Metals Federation, the single trade body for the UK casting Industry, which has 200 members. The UK Metals Industry The UK metals sector employs nearly half a million people. Annual sales total about £38 billion to customers in engineering, construction, automotive, aerospace and other manufacturing sectors. Activities in the UK comprise the following products: Steel Aluminium Non Ferrous Metals (Refined lead and nickel, copper and other alloys) Castings, pressings, forgings and stampings (ferrous and non ferrous) Constructional steelwork Galvanising Stockholding Metals recycling (scrap) Key statistics Annual Production 14 million tonnes of steel 1.2 million tonnes of castings 500,000 tonnes of aluminium The metals sector reclaims and processes, ready for re-use in manufacturing, 10 million tonnes of used or end-of-life steel Employment According to the Metals Forum, 471,000 people work in the metals industry. There are 30,000 metals enterprises around the country.

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Value to the UK economy According to the Office of National Statistics Annual Business Inquiry 2003, metals manufacturing created £15 billion of extra value for the UK economy equivalent to 10% of all UK manufacturing.

Skills activity in the metals sector Most activities in the UK metals industry aimed at improving skills are carried out by the former National Training Organisation MetSkill, which merged with SEMTA in July 2005. Metskills was formed in 2001 and incorporated Steel Training. Metskills provides a range of services for member and non-member organisations. The services include recruitment of new learners, and the planning, delivery and management of training programmes to meet the skills needs of the industry. In the past Metskills has benefited from DTI pump priming funding to deliver some of its activities. The metals sector places particular emphasis on recruiting high-calibre young people. There are many opportunities for able young people to progress to well-paid jobs with good career prospects in the UK metals industry. In addition, the National Metals Technology Centre (NAMTEC), based at Corus Swinden Technology Centre in South Yorkshire, has extended the scope of its activities from predominantly knowledge transfer into the provision of Research and Development, and skills and training. To achieve this, the Swinden Technology Centre has entered into a long-term tie-up with the local Learning and Skills Council which has moved on to the Swinden site to link up with NAMTEC. Manufacturing Skills Academy Manufacturing has been announced as one of the first four skills national skills academies (along with construction, food and drink and financial services) to move into the business planning phase. If the business planning phase is successful then the Manufacturing Skills Academy is aiming to open in September 2006.

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The academies could train tens of thousands of young people and adults each year and will play a key part in creating jobs, tackling skills shortages and driving up productivity. Manufacturing will need many more people trained in engineering and manufacturing skills and leadership and management. Figures aggregated from the National Employer Skills Survey (NESS) in 2003 suggest this sector currently has around 48,000 vacancies. 13,000 are skill shortage vacancies. A key role of the manufacturing academy led by the Sector Skills Council for Science, Engineering and Manufacturing Technologies Alliance (SEMTA) would be to encourage more young people and adults to consider a career in the industry by offering real opportunities for progression and skills development, linked closely to the vocational learning offered through schools. This initiative is being driven by well-known companies in each industry.

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Extracts from DfES paper: Phil Hope briefing for APPG Steel & Cast Metals meeting on Skills Gaps – 19 January 2006 Sector Specific Information and Initiatives led by SEMTA • Skills demand - the ten key drivers for skills identified by metals employers include the need for:

1. Employees at all levels who have the skills to add value and eliminate waste; 2. High quality engineers to lead change; 3. Improved innovation and technology transfer know-how; 4. More effective managers and leaders; 5. Culture change at all levels; 6. Skill level raised from Level 2 to Level 3 (50% of workforce at Level 2); 7. Transferable skills and re-training of older workers; 8. Increased competence-based training and qualifications; 9. Better quality new entrants; graduates and school leavers with relevant qualifications (e.g. maths and science); 10. Better quality and a bigger pool of metallurgists and engineers. • Specific skills gaps in particular parts of the sector include

A number of skills gaps and shortages have been identified in specific parts of the metals industry: Steel Multi-skilling of operators, Shortage of craft skills, particularly maintenance engineers and welders, Shortage of metallurgists and metallurgy expertise and Specialist skills in the welding and fabrication of stainless steel

Casting Specialist foundry skills, Industry-specific multi-skilling of first line operatives and technicians and Skills relating to sub-contract workforce Metalforming Selling skills for sales engineers and technicians, Technical skills in metal forging and fastener manufacture, Tool-making skills, Relevant die design and press operator training, Shortage of skilled electrical and mechanical maintenance engineers, IT literacy in design, computer controlled manufacturing and e-commerce and Multi-skilling in production. Lack of IT capacity Constructional Steelwork

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Craft skills shortages, particularly welding and plating, Shortage of graduate engineers with knowledge of structural steelwork and/or for future management roles, Shortage of 3D CAD design engineers and detailers, technicians and estimators, Training and competence-based qualification for steel construction erectors to meet the construction industry’s Skills Card Scheme requirements and Multi-skilling and standardised training in erection and cladding skills Initiatives currently in place Metals Industry Competitive Enterprise (MICE) Provision of process and supply chain improvement programmes by specially trained engineers; financial benefits/savings from companies participating average £220k and total about £30million p.a. Managing for Success "Middle Manager" development programme, focussing on behavioural skills and business improvement. Candidates achieve the new Management NVQ Level 4 Metals Industry Teamwork (Level 2) and Leadership (Level 3) Programmes Essential skills development and culture change programmes. Include project work, health and safety passport/passport plus and on-the-job assessment leading to NVQ achievement. Metals Industry Health and Safety Passport and Passport Plus Passport for production/shop floor employees and Passport PLUS for team leaders/supervisors; culture change training, knowledge and competence assessment with an NVQ Level 2 or 3 unit. Metals Academy Enhanced apprenticeships (including lean training from MICE, networking and social activities), careers information, education support resources and employer-led work experience programmes.

Skill Shortages: The National Position The position is improving: • Recruitment activity, increased over the period between 2001 and 2004 but the proportion of those vacancies that were skill shortage vacancies declined from 21% to 17%. Number of skill shortage vacancies per 1,000 employees fell over the

•

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same period from 8 per 1,000 to 5 per 1,000. • This trend is expected to have continued in 2005. But the proportion of establishments reporting any skill shortages has remained steady at 4%.

Variation by Size of Establishment: • Small firms are much more likely than large to report skill shortage vacancies – 12 per 1000 employees in firms with less than 5 employees compared to 2 per 1000 in firms with 500+ employees. Sectoral Variation in Skill Shortages: • There is considerable variation – in 2004 the construction skills sector reported 13 skill shortage vacancies per 1000 employees while central government reported less than 2 per 1000 • Other sectors with a relatively high density of skill shortage vacancies were land-based (Lantra – over 10 per 1000 employees) and building services (SummitSkills – over 8 per 1000) and with low density of skill shortages, Skills for Justice (less than 2 per 1000) and audio visual industries (Skillset –just over 2 per 1000).

Type of Skills Lacking: • The most frequently cited by employers as lacking in applicants were technical & practical skills (cited by 47% of those with skill shortage vacancies), followed by communication skills (40%), customer handling skills (36%), teamworking (32%), problem solving (29%). Professional IT skills and foreign language skills were relatively rarely cited (9% each). Literacy skills were cited as lacking in applicants by 28% of employers reporting skill shortage vacancies and numeracy skills by 25%.

•

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Extracts from Unfinished Draft Speech on ‘Skills and the Future Economic Success of the UK’

Management and Leadership Management and leadership is one of the UK's significant skills gaps. A key factor in the success of any business, especially one that is innovating and growing, is the quality of its management and leadership. More than 2 million new managers will be needed by 2012. Innovative ideas are often the vision of inspired leaders. Yet 36% of enterprises report that their managers are not proficient. The CBI Regional Economic Trends survey shows that 40% of all companies believe improved management skills would benefit business performance. We need to invest in our current and future managers and leaders as well as the workforce as a whole. According to a McKinsey/LSE study, UK firms are on average less well-managed than French, German or American firms in several key respects, though the same study shows that differences within countries can be at least as important as differences between countries – in other words you can manage a business well anywhere but only if individual managers make the right choices about their personal management practices. Some of the incentive to raise management quality will come from an open, competitive business environment, but DTI, DfES, the SfBN and partners are also working together closely on raising awareness of, and the quality of, management and leadership in the UK. 100 Best Companies to Work for – which DTI has supported since its launch in 2000 – has demonstrated publicly how good people practices can deliver improved business performance in a wide range of sectors. Shares of the companies on these lists have consistently outperformed those of the FTSE 100. Five-year compound returns to January 31 2005 show a 2.2% negative return for FTSE 100 companies, against a 10.2% gain for the Best Companies. Management and Leadership
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As I have already mentioned, management and leadership is a key skills gap for the UK. For businesses to be competitive they need managers and leaders who understand the value of and need for skills, and can deploy and utilise skills in support of innovation. Therefore we have set up a new Advisory Panel on Management and Leadership chaired by Ian Smith, Senior Vice-President and UK Managing Director of Oracle. This panel will oversee the ra nge of Government support, identify priorities for securing greatest impact and act as a champion in promoting management and leadership activity with employers. We have also introduced a Leadership and Management Programme for SMEs. Offering up to £1000 worth of training and informal support, such as mentoring and coaching, for senior Directors. And management and leadership has been identified as a priority for Sector Skills Councils. Analysis from the London School of Economics suggests that the biggest factor in the skills gap with Germany is the relatively low proportion of level 3 skills. Although the UK is making progress at level 3, we are still behind many of our competitors. Only 28% of our workforce have Level 3 skills compared to 51% in France and 65% in Germany Improvement in the level of technician and intermediate skills or Level 3 skills – is vital to the UK's productivity. 28% of UK workforce are qualified to technician and intermediate skill levels compared to 51% in France and 65% in Germany. This must be improved if we are to ensure our competitiveness. That’s why we’re allocating £20 million in both 2006-7 and 2007-8 to trial extending the National Employer Training Programme to cover Level 3 programmes in the crucial technician, associate professional and advanced craft areas.

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Extracts from Draft Speech for Opening of New Extension to NG Bailey’s Training Centre

Challenges & Opportunities Here in Yorkshire and the Humber construction is one of the largest industries and fundamental to all other economic activity. Total output is increasing. It is expected to be 19% higher in 2008 than it was in 2003. A 21st Century industry needs a business approach appropriate to the times. Clients are moving away from the cheapest bid to win contracts to selecting those that offer best value in terms of higher standards of work, better contractor relationships and a greater commitment to training. This will have a significant impact on future skills needs. The 2012 Olympics provides a great opportunity for the construction industries. Of the £10bn set out in the bid programme, £7bn is to be spent on roads and railways and £2.5bn on the stadiums and accommodation. But, unless action is taken in good time, serious skills shortages could hamper industry's ability to rise to this challenge. The industry already needs an extra 430,000 new recruits over the next four years. One company in five is said to experience skills shortages that are so bad they have had to leave vacancies unfilled.

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Extracts from Barry Gardiner draft speech for Manoj Ladwa Solicitors & National Skills Forum event

Last week I launched two reports commissioned by the DTI exploring the links between skills and innovation. Worryingly both reports suggest that the UK does not have sufficient skills for innovation in all parts of the economy. Both reports highlight all too starkly that there are a significant number of people who, at best, will be indifferent to innovation and the knowledge economy, and at worst will see it as a threat to their low-skilled employment.

Management and leadership is one of the UK's significant skills gaps. A key factor in the success of any business, especially one that is innovating and growing, is the quality of its management and leadership. More than 2 million new managers will be needed by 2012. For businesses to be competitive they need managers and leaders who understand the value of and need for skills, and can deploy and utilise skills in support of innovation. Therefore we have set up a new Advisory Panel on Management and Leadership chaired by Ian Smith, Senior Vice-President and UK Managing Director of Oracle. This panel will oversee the range of Government support, identify priorities for securing greatest impact and act as a champion in promoting management and leadership activity with employers. We have also introduced a Leadership and Management Programme for SMEs. Offering up to £1000 worth of training and informal support, such as mentoring and coaching, for senior Directors. And management and leadership has been identified as a priority for Sector Skills Councils.

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Extracts from Lord Sainsbury draft speech for the New Engineering Fellowship Seminar Scheme – 11 January 2006

We need to address the skills shortages by looking both at how science subjects are taught in schools and at what is taught –We know that not all science teachers feel they have the skills to teach specialist science subjects post 16 and that some feel they need to update their knowledge so they can use the excitement of contemporary science to inspire their students. This is why the Government has worked with the Wellcome Trust to create the network of Science Learning Centres to improve science teaching by providing teachers with better Continuing Professional Development. This should help them improve their teaching by updating their knowledge, and by giving them opportunities to learn about the latest approaches to teaching and developments in technology. The Science Learning Centres focus on encouraging innovative and exciting teaching practice that will enthuse and inspire young people and on improving the subject specialism of science teachers.

Manufacturing will need many more people training in engineering and leadership and management. Figures suggest this sector already has around 48,000 vacancies, 13,000 of which are skill shortage vacancies.

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The manufacturing sector proposes to develop a Manufacturing Skills Academy whose purpose is to provide a more coherent approach to training within the sector. This will help fill skills gaps in lead sub-sectors – aerospace, automotive, electronics and marine – and raise standards in course design and assessment. A key role of the academy will be encouraging more young people and adults to consider a career in manufacturing by offering real opportunities for progression and skills development, linked closely to the vocational learning offered through schools.

The Skills White Paper published earlier this year stated that a large proportion of the UK’s productivity gap with our competitors could be attributed to weaknesses in the supply and demand of skills. A key national gap is intermediate skills at Level 3 – technician, advanced craft, trade skills and associate professionals – with only 28% of the UK workforce qualified to these levels compared with 51% in France and 65% in Germany. My Department is supporting a project with the Engineering Technology Board, Engineering Council UK and a range of other key partners to link existing qualifications through to
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Engineering Technician registration requirements and then developing an appropriate education/individual/employer pathway plan to engtech registration. This work will play a major role in addressing this particular skills gap and should lead in the long term to an increase in the number of engineering technicians. In terms of our skills base we must harness the talent of every person in the UK – both men and women. Currently 75% of women with science, engineering and technology degrees are not taking up in jobs in this sector. 95% of engineering graduates are men. Women are still finding it too hard to break into this sector.

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Extracts from Skills Lord Sainsbury Manufacturing speech – November 2005

Manufacturing Academy The manufacturing sector proposes to develop a Manufacturing Skills academy whose purpose is to provide a more coherent approach to training within the sector by building upon cross-sectoral and regional initiatives already in place. These will help fill skills gaps in lead sub-sectors - aerospace, automotive, electronics and marine – raising standards in course design, delivery and assessment. The manufacturing academy will link closely with the SSCs with an interest in manufacturing to ensure their sectors have access to the academies products and services

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Extracts from Barry Gardiner draft speech for Innovation and Skills event – 8 September 2005

Worryingly both reports suggest the UK does not have sufficient skills for innovation in all parts of the economy. Both reports highlight all too starkly that there are a significant number of people who at best will be indifferent to innovation or the knowledge economy and at worse will see it cause a reduction in their current skilled employment.

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Extracts from briefing for Lord Sainsbury R&D Discussion with Pharmaceuticals industry Skills From Abroad High skilled migration brings important economic benefits. Migrants fill key skill gaps, provide capital investment and are a source of innovation and enterprise. So it is not surprising that Governments are increasingly encouraging high-skilled migrants into their countries. In the UK, the Highly Skilled Migrant Programme launched in January 2002, draws on the experience of Australia, New Zealand and Canada, to select skilled, adaptable individuals who are likely to make a substantial economic contribution. Unlike the Work Permit system, no prior offer of employment is necessary, allowing high-skilled individuals the opportunity to come to the UK to look for work or to start-up their own businesses. To be successful, individuals need to score highly against criteria including education and past earnings ensuring that the contribution to the UK economy is maximised. The Government has also streamlined the Work Permits system to make it easier for employers to recruit from abroad. Following a series of simplifications and improvements, the Work Permit system is now widely regarded as one of the most successful and responsive schemes in the world. Because the market for scientists is become increasingly global a new scheme has been put in place allowing foreign science and engineering graduates studying in the UK to have the automatic option of working in the UK for one year following graduation. This is crucial as increasing numbers of students from abroad come to study in UK universities – nearly half of all engineering and technology doctorates are already awarded to non-UK nationals

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UPDATE ON INSPIRED LEADERSHIP Background A major survey of nearly two thousand managers carried out in 2001by DEMOS and the Chartered Management Institute and Demos, revealed a significant inspirational gap in the leadership across UK organisations. The research demonstrated that the single most important factor people would like to see in their leaders (highlighted by 55 per cent of the sample), was “inspiration” However only 11 per cent actually saw this “ability to inspire” in their leaders. The DTI’s “Inspired Leadership” Research Project was developed to explore how we might close this critical leadership gap in order to optimise employee engagement and the resulting high levels of innovation and performance. In December 2004 the DTI appointed consultants to assist in developing a tool allowing individuals and teams to assess their leadership values and behaviours against a set shown to have a significant impact on inspiring “followers” in successful organisations. The audience of course also includes aspiring leaders and organisations wishing to either improve their management and leadership capacities or assess the progress of people on management and leadership development programmes. We are not looking to compete with the many Leadership Models that are already available. But to provide a tool that specifically focuses on the Inspirational/Motivational area where our partners and we believe that we can add real value and where a real improvement through a strong Index can have a disproportionately good effect on overall leadership capability and effectiveness. . LATEST POSTION This work is already bearing fruit with a number of organisations already involved in the project or wishing to do. We are now carrying out “live” testing of the tool. We will obviously be seeking an early opportunity to provide a presentation to the Leadership and Management Advisory panel. In the meantime if you want to try out the new Inspirational Leadership Insight Tool described above go to www.inspiredleadership.org.uk and enter the password: "2012". Once in, you will be given a password to access your results in total confidentiality. The selfassessment takes about 20 minutes to complete and you will need around 20 minutes to go through the findings and suggested practical actions. John Baker August 2005

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Management and Leadership Improving the UK's management and leadership capability is crucial to raising our productivity.
•

Must stimulate demand for inspired leadership and creative management development from employers and individuals Must ensure high quality provision of management and leadership which meets needs of individuals and employers Must ensure management and leadership is given priority in each sector

•

•

What Government is doing
•

Set up a new Advisory Panel on Management and Leadership chaired by Ian Smith, Senior Vice-President and UK Managing Director of Oracle. This panel will oversee the range of Government support, identify priorities for securing greatest impact and act as a champion in promoting management and leadership activity with employers. Introduced a Leadership and Management Programme for SMEs. Offering up to £1000 worth of training and informal support, such as mentoring and coaching, for senior Directors. Management and leadership has been identified as a priority for Sector Skills Councils.

•

•

Statistics
•

More than 2 million new managers will be needed by 2012 (Working Futures: National Report 2003-04) In the UK, around 4.5 million individuals (14% of the workforce) have significant management responsibilities, yet 36% of enterprises report that their managers are not proficient. Currently less than a quarter of managers have a management qualification. One in three employers report a skills deficiency amongst their managers. According to a McKinsey/LSE study, UK firms are on average less wellmanaged than French, German or American firms in several key respects, though the same study shows that differences within countries can be at least as important as differences between countries - in other words you can manage a firm well anywhere but only if individual managers make the right choices about their personal management practices.

•

•

• •

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Against this background organisations are losing millions of pounds - for instance in low productivity, poor communication, lack of team working, not being able to recognise the symptoms of stress or having the skills to deal with conflict.

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SUMMARY OF LEITCH REVIEW INTERIM REPORT: This has seven chapters which I have tried to summarise: Chapter 1: The increasing importance of skills. This chapter discusses some of the issues still to be addressed. Such as skills for employment, skills for productivity and also having a skill mix that increases social cohesion by reducing dispersion in education. This chapter also stresses that rather than trying to predict new technologies driving skill need there are arguments in favour of flexibility of supply of training to respond to changing business needs for the future. This chapter also has a good emphasis that taking advantage of technological innovation will require higher skills. This chapter also addresses excluded groups although it tend to be those claiming benefits. E.g lone parents rather than women returners. Chapter 2: Where are we now? This chapter addresses comparisons with other countries in terms of qualifications and productivity. This chapter tries to emphasise that skills are more than just qualifications but apart from IALS (comparisons of international literacy) does fall back on qualifications as a proxy for skills. However does look at generic skills that are demanded in terms of team working , customer care etc. Chapter 3: Impact of Current Skills Profile This chapter is largely looking at skills shortages and I have a slight issue that as usual skill shortage vacancies are presented as a large number (105,000) without reference to the small percentage this is of total employment. : Other findings: It says 2001 data suggested key shortages in: • • Engineers, scientists and IT professionals at the craft level. Business service jobs such as accountants.

But 2003 figure suggest shortages in: • • • Low level service jobs Skilled craft jobs Health associates such as nurses.

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Despite a graph suggesting the most importance skill shortage vacancies are in low level service sectors like hotels and catering there is a recognition that this may be more to do with low pay and poor working conditions. This chapter has an interesting diagram (chart 3.2) on how M and L skills are deployed. This chapter also presents evidence on who pays for what and two key points are: • • In the UK investment by individuals in their own training is 19% compared to an OECD average of 36%. Although employer spend on training is often quoted at £23bn. It says that only £2.6 bn of this is payment to third party training providers (the vast majority is on the job training or wage related costs for attendance on courses.)

Chapter 4: Where are we heading This looks at projections of skill demand by matching qualifications to projections of growth and decline in occupations. It concludes that on current projections there will be: • • • More people with Level 2 skills and below than jobs requiring these qualifications Less people with Level 3 skills than jobs requiring these qualifications. Very slightly more people with level 4 qualifications than jobs requiring these qualifications.

Chapter 5: Raising our sights This chapter looks at scenarios on investing in various skills assuming that demand can also be increased through higher productivity (it looks at increasing productivity through lower productivity sectors “catching – up” or through low productivity sectors suffering decline which they term “restructuring.”) They use rates of return (wages) data to try to do cost benefit analysis for various scenarios: 1. Baseline (achieving current targets and PSAs) Employment would be 275,000 – 325,000 higher by 2020 Net benefit of £3.6 bn- £3.8bn per year on productivity 2. Low level which is addressing basic and low level skills 92

Employment 375,000 – 425,000 higher in 2020 Net Benefit : £3.9 bn – 4.1 bn per year on productivity 3. Intermediate skills Employment: 350,000 – 400,000 higher in 2020 Net Benefit: £4.5bn - £4.7 bn on productivity. 4. High skills Employment: 335,000 – 385,000 higher in 2020 Net Benefit: £5.2bn - £5.4bn per year on productivity. Note: there are large caveats on the sensitivity of this data especially as rates of return do vary enormously within qualification levels between subjects and types of qualification. There is also a note that they want to look at these scenarios according to impact on social equality (gap between qualified and non-qualified) Chapter 6: Current framework for improving skills This looks at who currently pays for qualifications and in general terms who does what but is still very high level. Dti positioned as a very key player in the skills agenda mainly through its role in innovation and business support and in its sponsorship of RDAs (and BLS through SBS) and as a supporter of the SfBN. Chapter 7: Issues for the review This looks at the areas the review still needs to address and includes large issues on: • • • Type of skill mix required in terms of technical subject or generic skills. Who pays for what including how to increase employer and individual investment in skills. The skills needed for successful innovation.

Maria Cody 15/11/05

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-----Original Message----From: Thomson James (Mr J) Sent: 27 October 2005 16:52 To: Thomas Emily (Ms ); Madson Bron (Ms B); Baker John (Mr JDC); Hodgkinson Keith (Mr KA); Wallington Michelle (Ms M); Lancaster Lucy (Mrs L) Subject: FW: NSA press notice

Please see email below, are we content with this? I thought the whole purpose was to fill these skills gaps and that is why we were establishing the academies in the first place as part of the Government business manifesto. Isn't this good news that we are trying to make a difference? James
-----Original Message----From: Ben.WILSON@dfes.gsi.gov.uk [mailto:Ben.WILSON@dfes.gsi.gov.uk] Sent: 27 October 2005 16:39 To: James.Thomson@dti.gsi.gov.uk Subject: RE: NSA press notice

James - just so you know, we are going to take these figures below out - i think people could wrongly interprete them as headline figures and talk of skills crisis etc grateful if you could do similar in anything you issue - thanks Nature of the Skill Gaps Of establishments reporting gaps: - Financial Services – 56% reported gaps in communication skills, 55% in customer handling, 41% in general IT user skills. - SEMTA – 63% reported gaps in technical & practical skills, 52% in team working, 47% in problem solving. - Improve – 73% reported gaps in technical & practical skills, 65% in team working, 62% in communication skills. Construction Skills – 54% reported gaps in technical

From: Thomson James (Mr J) [mailto:James.Thomson@dti.gsi.gov.uk] Sent: 27 October 2005 15:54 To: WILSON, Ben Subject: FW: NSA press notice Dear Ben,

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Please see email below to note that: The press notice still has Manufacturing Academy as the SEMTA academy where the 4 proposals are described at the end. It must please be called the Manufacturing Academy and not SEMTA. We need to have a final version of the press notice to be able to give our SoS an idea of the context of his quote. when can we expect to see this?

Many thanks James DTI Newsroom 020 7215 5974

-----Original Message----From: Hodgkinson Keith (Mr KA) Sent: 27 October 2005 14:02 To: Thomson James (Mr J); Baker John (Mr JDC); Young Clive (Mr C) Cc: Wallington Michelle (Ms M); Madson Bron (Ms B); Thomas Emily (Ms ) Subject: RE: NSA press notice James Thanks. Some of the stats you are after will be hard to pull together as these numbers are not all fixed yet. In particular the private/public funding models are to be developed in the business planning phase (at least for the MSA this is true). This is more for DfES than us anyway. But John Baker has cross cutting responsibility for skills academies here at DTI and may be able to assist with these general points. My interest is purely the Manufacturing Academy (MSA). The press notice still has it as the SEMTA academy where the 4 proposals are described at the end. I repeat - it must be called the Manufacturing Academy. In describing the MSA you could add that; "The Manufacturing Skills Academy aims to start with 4 lead sectors, automotive, aerospace, electronics and marine. It will focus initially on the key areas of technical workforce development, business improvement techniques and management and leadership. The employer-led business planning process is expected to focus on how best to address common skills needs across manufacturing with a specific focus on the delivery of priority skills, raising quality and capacity, improving information and guidance and curriculum development." -----Original Message----From: Madson Bron (Ms B) Sent: 27 October 2005 12:43 To: Thomson James (Mr J)

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Cc: Lancaster Lucy (Mrs L); Wallington Michelle (Ms M) Subject: FW: press notice Sorry -----Original Message----From: Ben.WILSON@dfes.gsi.gov.uk [mailto:Ben.WILSON@dfes.gsi.gov.uk] Sent: 27 October 2005 12:19 To: John.SHIELD@dfes.gsi.gov.uk; Richard.DARLINGTON@dfes.gsi.gov.uk; Nicola.SAVAGE@dfes.gsi.gov.uk; Susan.ROGERS@dfes.gsi.gov.uk; bron.madson@dti.gsi.gov.uk; chris.norton@dti.gsi.gov.uk Subject: press notice

please find attached a first draft of a joint press notice for Monday. As you can see there are information gaps which I am working on with officials - anything relevant DTI have particularly on labour market shortages would be appreciated. This also needs a quote from Alan Johnson.

I have just picked this up but as I understand it the FT i/view with Phil Hope (embargoed until Monday) was set up a long-time before the decision was taken to make this a joint AJ/RK announcement. I have spoken to Chris and we have agreed a workable way forward would be to a) issue this PN on Friday with 00:01 embargo so all papers get it for Monday and b) consider whether AJ speaks direct to FT/ draft AJ quotes in order to get DTI perspective into the piece. Once I have confirmed figures will send round another draft but so you have an early sight. Susan - do the LSC have to issue their own PN or can we all just stick to this one? Ben ***************************************************************** ***** This email and any files transmitted with it are confidential and intended solely for the use of the individual or entity to whom they are addressed. If you have received this email in error

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please notify the system manager. This footnote also confirms that this email message has been swept by MIMEsweeper for the presence of computer viruses. www.mimesweeper.com ***************************************************************** *****

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Extracts from Skills Alliance Meeting note – 23 November 2005

2. Lord Leitch gave a presentation on the interim findings of his review into what skills profile the UK should aim to achieve by 2020 in order to support productivity, economic growth as well as social objectives over the longer term. 3. In discussion the following points were raised: a. The US had many excellent models of how to skill people to meet the demands of business and the UK could benefit from considering these although concerns were raised about the significant levels of under achievement in the US. One such model was Community Colleges where students gained clear advantages from the involvement of employers in structuring and delivering the curriculum. Students did not need to go into the workplace to gain these advantages. b. Technical and skilled craft jobs at Level 3 were a key issue because they continued to be difficult to fill and demographic changes would mean that the demand for people with these skills would increase. c. The Government’s target of getting 50 per cent of young people into higher education by 2010 had attracted some criticism, however this was no more than the average figure for participation in higher education for most developed countries. By 2020, 40 per cent of jobs could require higher-level skills. It was suggested that for some employers the issue was actually that higher education was not providing young people with the skills necessary to be employable. d. In order to deal with the magnitude of change being proposed, colleges would need additional investment if they were to be successful. There was a particular need for capital investment to modernise colleges. e. It was important to persuade employers of the link between skills, productivity and the bottom line in order to increase longer-term investment in training and human resources. It was recognised that it was harder for SMEs to view longer-term investment, however proportionally SMEs trained more than bigger companies. f. Research suggested that one third of employers offered no training. Therefore a culture change was necessary to ensure the readiness of employers to invest in training through all levels of a business. It was suggested that compulsory measures to ensure businesses invested in skills development were necessary to bring about this culture change. However, others thought that incentivising employers to invest would be more beneficial and effective. 98

g. Whilst employers were very focused on improving the productivity of their businesses they did not relate this to national productivity statistics. It was suggested that business was not as involved as it had been previously in the national training system and therefore they were not impacting enough on the system. However there were demand-led solutions coming through at regional level through Regional Skills Partnerships. h. It was vital for the UK to develop management skills. A study by the LSE and McKinsey had highlighted the importance of management skills in the manufacturing sector for example. i. The analysis on social inclusion was welcomed. For those who were economically inactive or low skilled it was necessary to raise awareness of the benefits of skills development and to ensure ease of access to provision. There were a high proportion of individuals who learnt in their own time but the majority of these were in employment. j. The Women and Work Commission’s report being published in the Spring would contain recommendations on what could be done to help those who needed training but faced barriers in getting it, e.g. women returners. k. There was strong support for the analysis that had been done and Members looked forward to the recommendations and conclusions in the final report in the spring.

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Extracts from National Skills Academies Press Briefing

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THE CBI’S RESPONSE TO THE GOVERNMENT’S WHITE PAPER – SKILLS: GETTING ON IN BUSINESS, GETTING ON AT WORK 1. The CBI welcomes the opportunity to respond to the government’s White Paper, ‘ Skills: Getting on in business, getting on at work’. The CBI welcomes the government’s objective of raising business performance rather than simply improving skills as an end in itself. The White Paper identifies a coherent strategy for raising the skills of the workforce. The government must now ensure that it delivers on this strategy, in particular in ensuring that the publicly-funded learning and skills infrastructure makes a positive contribution to raising individual employability and the performance of businesses, both large and small. 2. The CBI’s key messages are that: • raising business performance through improving skills requires a range of approaches • the National Employer Training Programme is a step forward but concerns remain over rights to time-off for training • reform of the supply of training should go further • Sector Skills Agreements could provide a catalyst to improve the standards of vocational training, but must not be a one-size-fits-all solution • sector academies have merit but the government should build on existing models and raise standards in Further Education colleges • employers, particularly SMEs, require high quality brokerage and information on training – but the current skills infrastructure is overly complex • the CBI welcomes moves to reform vocational qualifications, but more must be done to make Apprenticeships more attractive to employers • a Union Academy must focus on raising skills, not union recruitment. Raising business performance through improving skills requires a range of approaches 3. A competent workforce is a prerequisite for a highly productive business community and is essential for UK competitiveness. There is ample evidence to suggest that UK firms are heavily committed to training – employers invested £23.5bn on training per annum, compared with the Learning and Skills Council’s budget of £9bn. CBI’s Employment Trends Survey consistently shows that employers believe that the two most important HR factors influencing firms’ competitive advantage are management and workforce skills. Eighty-four percent of employers faced with internal skills gaps respond by increasing training and/or increasing the number of trainee programmes. UK employers continue to value the Investors in People Standard, with over 37,000 firms achieving IiP status to date and a further 24,000 committed to achieving it – covering nearly 40% of the workforce. Recent data from the European Commission illustrates that the UK performs well – 21% of the UK’s adult population had taken part in education and training in the previous four weeks – the second highest amongst member states and well above the EU average of 9%. 4. Although the UK compares favourably with its competitors in terms of the proportion of the workforce with high level skills and on employer spending on training, there can be no room for complacency. There are still too many adults 102

with low skills – a third of the working age population is not qualified to level 2 – and too many young people (16-19 year olds) do not have literacy (16%) and numeracy (50%) skills to at least a level 1 standard. The UK still compares poorly to key competitor nations in terms of the proportion of the workforce qualified at intermediate level. 5. There is a consensus on the priorities for government funding – to raise the educational attainment and employability of young people, to tackle the long tail of low-skilled adults and enabling employers, particularly SMEs, to access training that meets their needs. Achieving these priorities and delivering a competent workforce is a shared responsibility: • employers are responsible for the training and development of their employees to meet business needs and where possible they should assist in their employees’ long term development • employees are responsible for their own development and employability beyond the needs of their current employment but they may need support and encouragement to develop this level of responsibility • government is responsible for the education and training of young people and should ensure they are employable. It should deal with market failure and support organisations with little capacity to train and individuals with little opportunity to learn. It must ensure that the education and training system improves to meet both employers’ and individuals’ needs. 6. The evidence of employer commitment to training indicates that the voluntary system is working – although there are market failures with regard to low-skilled individuals. The problem of low skills in the UK is serious but moving away from voluntarism and towards a uniform approach to workforce training with measures such as a right to time-off for training is unlikely to solve the key issue of motivating the low-skilled and small employers. 7. If employees are not motivated to learn, there is a real danger that employers would have to absorb the high costs created by a right to time-off without seeing an impact on the problem of low skills in the workplace. Such a right would also be unworkable for a large number of businesses, particularly SMEs, and would tend to reinforce the view among some employers that training is a cost rather than an investment. In other European countries where a right to time-off for training exists, take-up has been low and greatest amongst those with higher level skills – France, Belgium, Denmark, Germany and Finland give workers a right to paid educational leave under certain conditions but the OECD found no clear data on whether such measures have been successful in increasing gainful adult training. 8. The experience of the Employer Training Pilots (ETPs) has shown that when training is delivered flexibly, to a high standard and primarily in the workplace, significant pent-up demand amongst employers is released – over 15,000 employers have participated to date. Government must address market failures through focusing on improving training supply, ensuring employers can access high quality, relevant training delivered where and when they want it.

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9. The White Paper also continues the government’s considerable emphasis on a sectoral approach by using Sector Skills Councils (SSCs) to raise demand for skills through voluntary collective action by way of Sector Skills Agreements. However, it is essential the government recognises that not all employers wish to be involved in or use their SSC; some firms look to local relationships for support and others will only train in an informal manner. A range of approaches for supporting employers to find the right training and to develop their businesses is therefore necessary. The National Employer Training Programme is a step forward but concerns remain over rights to time-off for training 10. The government sees the National Employer Training Programme (NETP) as ‘the core of the demand-led approach to delivering training for employers of all kinds – private, public and voluntary’. CBI has advocated an approach that ensures employers have access to high quality training, that meets their specific needs, with informed choice over the training provider that best meets these needs is essential in raising the UK’s skill base. CBI members have therefore supported ETPs and the development of the NETP, extending the principles to higher levels of training. 11. Members have particularly welcomed the pilots as they offer free, flexible and brokered training, delivered primarily at the workplace for low-skilled employees. Building on ETPs, the CBI welcomes the government’s commitment to deliver NETP in a way that will deliver: • fully subsidised training to level 2, chosen by the employer • flexible training provision delivered when, where and how employers want it, primarily in the workplace • competent brokers who identify and source high quality training which match employers’ requirements at all skill levels • use of the assess-train-assess model to build on employees’ existing competence and make the most effective use of resources • specified time to train during normal work hours for employees without a level 2 qualification. 12. The CBI believes that building on the success of ETPs, the NETP offers the potential to be a catalyst for improved provision of workforce training, with employers able to choose the training provider that best meets their needs, whether public or private. The Skills White Paper promotes the principle of contestability to incentivise colleges to deliver what employers and learners really want. Contestability uses the threat of competition to encourage current suppliers to behave as if in a competitive environment and therefore achieve higher quality at lower cost. Funding for level 2 provision and below will continue to be fully funded and made available to any LSC-accredited training provider – colleges therefore have to compete with the private sector for this public money. 13. The CBI welcomes the increased emphasis on skills at level 3 and above – including piloting of an approach that will route funding for level 3 training through the NETP. Employers see greater returns in investing in skills at these levels and will be willing to contribute to a greater extent – a range of effective 104

co-financing models in these pilots must be developed to encourage wide employer take-up. 14. However, two challenges remain key to the success of the NETP. The first is in ensuring that there is capacity within the system to provide the necessary high quality, flexible training. The second is ensuring the brokerage system is able to meet employers’ needs in terms of assessing their skills requirements and identifying the right high quality provision that meets their needs. If these elements are not in place, employers are highly likely to view the programme as yet another initiative that has little impact on the ground. The potential of the NETP is clear, but capacity must be in place to ensure that it delivers for employers and employees. 15. Brokers must work with the employer to identify their training needs and compose a package of training to address employers’ wider skills needs, sourcing provision from the most appropriate providers. Employers will be expected to contribute towards training at level 3 and above and will do so if the right provision is available to them. 16. A key concern for CBI members was that the government would introduce a right to time-off for training through the NETP. Specifying a minimum period of training would be arbitrary and would not take into account the diverse requirements of individual businesses, employees and courses. The White Paper suggests a requirement for employers who want to qualify for the free training element of the programme (i.e. training at level 2 and below) to allow employees a minimum amount of paid time to train in normal working hours. 17. Training and accreditation of skills is delivered most effectively in the workplace and on-the-job training is equally as valuable as off-the-job. Specifics of training programmes should be decided at company level, between employer and employee, and not imposed by the government. Firms have diverse training requirements – some will require off-the-job training for their staff, but many will not. For employees, being accredited for existing skills and achieving a qualification can be valuable in itself in terms of motivation and employment mobility – some employees just need support to gain accreditation and this could be done on-the-job. Although it must be the case that the primary focus of the NETP should be on raising skill levels, not just on accrediting existing competencies, setting a minimum period of time to train is likely to be ineffective if not interpreted flexibly. 18. In the ETPs, employees are entitled to either 35 or 70 hours paid time-off to train over the period of the training programme. In practice, this time-off for training has been interpreted flexibly. Much of the work towards NVQs, for example, can and should be done on-the-job. In the pilots, employees have used the fixed periods of time off for assessment, independent learning and compiling evidence. This is usually done in the workplace, minimising disruption and increasing relevance of training for both the business and the employee. Reports from CBI members involved in the pilots suggest this flexible approach is being used successfully on the ground.

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19. CBI suggests that the guidance should specify that ‘the minimum time to train during normal working hours be sufficient and appropriate to undertake the training, given the existing competence of individual employees and the level and nature of the training need’. Employers should be advised to ensure that each employee has sufficient and appropriate time to train during normal working hours in order to raise their skills to the agreed level. Appropriateness should be determined by the employer’ s operating requirements, the employee's existing competencies and the demands of the course. This time to train will include assessment and portfolio-building where necessary. Employees should be expected to spend some time during out-of-work hours fulfilling course requirements. 20. The first stage of the assess-train-assess process used in the ETPs should identify employees’ existing competencies. The broker should be able to advise on the demands of the course and the employer will know what its operating requirements are. The broker and employer, using this information, will be able to determine at company-level the amount of time to train within normal working hours that would be reasonable to allow a proper opportunity to complete the course requirements. Such an approach would create a system that genuinely meets employers' and employees’ needs and avoids prescription. 21. The White Paper does not provide a definitive policy decision on whether the NETP will include wage compensation, although it is highly unlikely to be as widely available as in the majority of the pilots. The CBI accepts that constraints on public funding mean that if there is some element of compensation, this should only be available to act as an incentive for those employers who most need it. Reform of the supply of training should go further 22. The White Paper continues the government’s policy of a ‘demand-led’ approach to skills and training and improving FE’s ability to deliver – this is welcome. Key to the success of such policies is to ensure that the supply of training and skills is high quality and can deliver to employers’ and individuals’ needs. The success of the NETP, for example, will rely on it. 23. CBI members have indicated that there is significant dissatisfaction with many FE colleges’ workforce development provision – although individual colleges have been commended – and radical change is required to improve performance and ensure public funds are used effectively. Although the White Paper argues that quality in the sector is improving – citing satisfaction rates of learners and employers of 90% and 80% respectively – the government rightly recognises the need for improvement within the FE sector. It has implemented, or plans to implement, a number of programmes to improve supply and raise the quality of college provision. 24. Whilst the CBI supports the government’s efforts to raise quality and employer responsiveness of colleges, funding is the key driver in reform of the training system. The principle of contestability is advocated within the White Paper and the government states that the LSC’s funding will increasingly be used to reshape provision by investing only in high quality education and training, withdrawing

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funding from programmes which are not meeting employers’ and learners’ needs. This, as a statement of the rationale for reform, is welcomed by CBI members, as is reference to ensuring contestability. 25. The CBI proposes that there be an end to ring fencing of FE colleges’ workforce development budgets, but that they could continue to receive ring-fenced funding for general education provision. This would mean that employers and individuals could purchase publicly-funded training from any LSC-accredited provider, be it an FE college or not. 26. Given the low engagement of employers with FE colleges and the poor performance of many colleges in working with businesses to deliver training, no part of the funding available for workforce development should be ring-fenced so that some providers are in a privileged and protected position. Funding should be opened up to all providers – increasing competition, raising overall quality, and giving employers and individuals real choice. Removing this funding distortion would mean that employers were more inclined to choose provision based on quality of service and specific need. 27. The training market must become more competitive, with greater choice and flexibility available to both employers and individuals, so that they can more easily access good quality, relevant training provision. Although the government’s proposed reforms may induce some positive change in the behaviour of public providers towards meeting business needs, they do not go far enough. 28. Government funding for workforce development must encourage a system that enables employers to access high quality training that meets their needs. The split between the funding available for workforce development and individually motivated learning is in place in all areas with the exception of the FE budget. A significant proportion of the £4.3bn colleges receive from the LSC is used to deliver workforce development, although it is unclear exactly what proportion this actually is – estimates range from £1bn to £2bn for combined youth and adult provision. 29. The CBI recognises that the government will want to preserve the stability of the college sector, but a ‘change of culture and expectations’, as expressed in the Skills White Paper, must mean a move away from college protectionism and towards a market for workforce training provision that will encourage a strong focus on customer demand. Such a system would recognise that some colleges do have expertise in delivering training to employers and allow them to compete, on an equal footing, with other providers for workforce development funding. 30. Colleges have shown ability to rapidly adapt to the new priorities and many demands placed on them and they should be commended for this. However, in order to become a valuable resource in addressing the UK ’s skills needs, more radical reforms are needed to realise this aim. The government accepts that a demand-led approach is a necessity – it must now build upon the reform programmes it has already outlined and ensure that the sector delivers for employers and individuals.

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31. The CBI welcomes Sir Andrew Foster’s review of the future role o f FE colleges. The CBI is represented on the Review Panel and has responded to the Review’s call for evidence. Sector Skills Agreements should not be a one-size-fits-all solution to skills needs 32. Twenty-two Sector Skills Councils (SSCs) are now licensed and the White Paper continues the government’s emphasis on them to be the prime means for employers to communicate skills needs to government departments and training providers. The CBI supports SSCs and the Skills for Business Network and the potential they have in increasing the employer voice in the skills and training system, particularly in ensuring that vocational qualifications are fit-for-purpose. Employers must see more action from SSCs of benefit to their businesses if they are to view them as useful and worthwhile organisations. 33. Sector Skills Agreements (SSAs) have been drawn up by four SSCs to date – ConstructionSkills, e-skills UK, SEMTA and Skillset. They are intended as the primary means for each sector to identify employers’ skills needs and the best way to address them. The government has stressed that it will not impose any particular approach to SSAs – employers in their sectors are the best judges of what is needed in terms of skills now and in the future, and how to achieve them. 34. However, whilst advocating voluntarism with regard to employers deciding on the best means to address sectors’ skills issues, the CBI is concerned that the government appears to be encouraging SSCs to move towards a training levy. The White Paper focuses heavily on the voluntary levy in the film production sector, currently operated by Skillset. If employers have voluntarily decided that this is the best means of addressing skills in the sector, then this is acceptable. Training levies existed in the past but were abolished in most sectors due to the high cost of administration, both centrally and in companies, and because they failed to achieve their aim of increasing training provision. Members would be concerned at a return to a model that has fallen into disrepute. 35. However, there is concern as to the extent to which SSAs reflect the concerns and agreed actions of the majority of businesses within the sector. CBI’s Employment Trends Survey 2004, for example, indicated that just 27% of employers had had contact with their SSC and more recent feedback from some members suggests that small business involvement or recognition of SSCs is not particularly high. Implementing statutory backing for training levies decided as part of SSAs could heavily impact on a large number of firms not involved in their SSC. It is absolutely essential for any SSC wishing to introduce any statutory mechanism such as a levy through its SSA to ensure it has the full support of the sector. 36. Furthermore, the White Paper suggests that the government will make a value judgement as to what an ‘effective’ SSA is. The White Paper states that ‘sectors developing effective SSAs will be given priority in allocating funds for the new sector Skills Academies’. Rather than this as a basis to decide priority amongst sectors, the government should consider whether funding should be allocated on the basis of need, prioritising sectors with persistent and economically significant

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skills shortages, whether a sector is deemed innovative or the extent of employer commitment to the SSA. Sector academies have merit but the government should build on existing models and raise standards in Further Education colleges 37. The White Paper indicates the government’s intention to establish an academy for each major sector of the economy, offering courses for young people and employees that are particularly relevant to the sector. Although members are likely to see their merit, establishing them must not distract from the priority of ensuring that every college is able to deliver a high quality, responsive service. 38. It is envisaged that Skills Academies – the first four of which should be operational by September 2006 – will link with the existing Centres of Vocational Excellence (specialist areas of vocational provision within colleges characterised by close links with employers) to give national coverage. This hub-and-spoke model is welcome and will be more effective than a single physical building housing the Academy. The government should build on what already works – the Automotive Academy model, with its regional spokes, has been successful to date. 39. However, CBI members, particularly those in manufacturing, are concerned about duplication and waste of resource. Due to the considerable overlap between sectors in terms of skills needs, rather than an academy for every sector – as government suggests – a better approach would be to establish, for example, a Manufacturing Academy, with sub-courses addressing specific sectors’ needs. 40. CBI believes that sector academies should only be set up if there is a real demand amongst the employers in that sector. The sector academy model must fully integrate with the existing skills and training system if it is to be seen as a part of the solution to improving training supply and not a marketing exercise. Employers, particularly SMEs, require high quality brokerage and information on training – but the current skills infrastructure is overly complex 41. The infrastructure which was established to help deliver the government’s skills agenda is overly complex and delivers a patchy service to employers. A huge number of skills initiatives have been introduced over recent years, creating confusion amongst employers, who have seen little impact on the ground. For example, since the establishment of the LSC in 2001, CBI surveys have indicated that employers want specific assistance from the LSC in accessing available funding, help in achieving the Investors in People Standard, getting employees accredited with relevant qualifications a nd setting up education and business links. The LSC should by now be providing a good service to all, but satisfaction levels amongst employers is disappointing. With the passing of the first anniversary of the government’s Skills Strategy last summer, the CBI asked businesses how satisfied they were with their local LSC – while 71% of employers were satisfied, 29% were not. 42. For employers to be able to access training providers effectively, it is essential that the government agencies responsible for skills work together to promote and

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facilitate good quality training. There are, however, a confusing number of government agencies, government-supported bodies, business support agents and funding streams delivering skills policy and initiatives for employers. While efforts to ensure the various agencies work effectively together to avoid confusion and an overlap of responsibilities are welcome – such as Regional Skills Partnerships and the work of Sector Skills Councils – serious problems remain. 43. Many agencies remain relatively new or have been recently reorganised or rebranded, meaning that businesses are unsure where they should go to look for guidance and assistance. It is essential that employers are presented with clear and consistent information as to where they can seek support for training and skills initiatives. More has to be done to ensure the network of support agencies is able to provide an effective, joined-up service – NETP brokers must play a key role in supporting businesses, particularly SMEs. 44. The White Paper places considerable emphasis on Regional Skills Partnerships to deliver on brokerage, the NETP, the 14-19 education reforms and HE. To date, most employers have felt little benefit from the operation of the RSPs. If they are to have a positive impact on businesses in the region, RSPs must work harder to address the real concerns of employers, involve more local firms where possible and illustrate the benefits they are bringing to the regions. The CBI welcomes moves to reform vocational qualifications, but more must be done to make Apprenticeships more attractive to employers 45. The CBI welcomes the QCA’s Framework for Achievement proposals. We believe that the SSCs are best placed to make detailed input in the design of the new framework. Increased unitisation and moves towards a credit-based system will permit increased flexibility within the system, both for employers and individuals, and allow clearer progression routes. 46. CBI members support moves to create a less bureaucratic and more flexible system of vocational qualifications. They would welcome a unitised system which is more responsive to employer and employee needs. A system which allows employees to take bite-size chunks of qualifications, rather than having to take whole courses, would be of real benefit. Members have emphasised, however, the need to ensure that generic skills – such as customer care or supervisory skills – are transferable and dealt with by a cross-sectoral approach. It is essential that the SSCs and the awarding bodies are fully supportive in order to ensure that valued brands are not undermined and that additional bureaucracy is not created – they have the expertise and specialised knowledge and can add real value to this exercise. 47. The CBI agrees that apprenticeships are the key means to improve the UK’s technician level skills and an important strand of the Skills Strategy overall. The reform of qualifications will have a beneficial impact on the programme. However, while the number of apprenticeship starts is encouraging, completion rates are particularly concerning. The 2004 CBI Employment Trends Survey indicated that members believe improving apprenticeships is the third most

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important priority for government on young people’s skills after addressing young people’s basic skills, and teaching capacity and quality. 48. We recognise that the demand for apprenticeship places by young people currently significantly outstrips those offered by employers. The CBI will play its part by highlighting apprenticeship success stories to all CBI members through our report on skills, which it will be publishing later this year. This project aims to identify good practice in companies on a range of types of skills development for their workforce and management. 49. However, the key to increasing uptake is ensuring that apprenticeship frameworks are actually valuable and relevant to businesses. Raising awareness must occur in parallel to developing more flexible frameworks, better teaching and assessment of the key skills element and better information, advice and guidance for young people. 50. Members report that they achieve completion rates close to 100% where they are able to choose high calibre students. However, completion rates suffer because young people lack the appropriate basic skills and many are unable to adapt to the requirements and expectations of working life. 51. Particularly welcome is the trialling of adult apprenticeships. This has been longawaited and CBI members see these as a key means for developing their workforce as a whole, including those who may already have significant experience of the world of work. A Union Academy must focus on raising skills, not union recruitment 52. Current TUC and union activity in skills and training includes over 8,000 Union Learning Representatives and over 450 Union Learning Fund projects. The TUC are proposing to bring all their learning activities under one brand – a ‘Union Academy ’ – which will provide a wide range of services to support union members’ education and training, train union officers and broker training courses. The Union Academy will be financed by public money – £1.5m in 2006/7 and £3m in 2007/8 – and so must concentrate on raising workforce skills and not be used as a union recruitment tool. The government must continually assess the effectiveness of the academy in meeting its stated objectives. 53. CBI members believe learning reps have played a valuable role in encouraging individuals to learn, particularly with regard to basic literacy and numeracy training, in those firms where there is an effective relationship between the employer and the learning rep. The services provided by a Union Academy should complement the training undertaken by the employer, if the training is to benefit the employee at work. * Human Resources Directorate June 2005 * *

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Extracts from East of England RSP response to Skills White Paper

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Extracts from South West RSP response to Skills White Paper 7. Key Economic Statistics about the South West • • The older population is increasing at a faster rate in the South West than for England as a whole. Almost a quarter of the adult population in the South West has problems with basic literacy and numeracy and, as a result, could earn up to £50k less over the course of their working lives (SW of England RDA). GVA per worker is £12,880 in the South West, compared to an overall UK figure of £14,852 and the London value of £19,526 (NESS) There are markedly differing fortunes across the region. Low output per head, low earning levels and relatively high unemployment dominate the picture for the west of the region. Between 1995 and 2000 the number of jobs in the South West increased by 155,000 (8%) (NESS) Just less than a quarter (23 per cent) of establishments in the South West suffer from internal skills gaps, with staff being regarded as less than fully efficient. (NESS) A 10th of all establishments in the South West reported that they were facing hard-to-fill vacancies and 5% of establishments were facing skills shortages (NESS) The South West has one of the most highly qualified workforces in the UK, with a quarter having qualifications at Level 4 or above. (NESS) The South West has the highest net influx of people of any UK region A net 2000 new graduates leave the region every year after graduation

• •

• •

•

• • •

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Extracts from South East RSP Response to Skills White Paper
3.3 THE RSPA TASK GROUP ON HIGHER EDUCATION

In light of the White Paper on Skills, The HE Task Group has identified the following key areas that the RSPA may wish to work with the HE sector in engaging business and supporting sustainable economic growth: • The need to underwrite the creation of more researchers, developers and technicians in shortage strategic subjects, and we need to tie in skills advice to innovation advice and support. Improve high level technical skills – our technical workforce is under skilled, under appreciated and lacks flexibility. There is shortage of highly skilled people rather than an actual shortage of people. Sourcing quality technicians is a real challenge. Improve leadership skills to provide vision, courage and confidence to innovate. Improve management skills to release creativity, to capture and transform ideas into action, and to identify new opportunities to learn from others. Foundation Degrees (including delivery through work-based learning). Role of the Sector Skills Councils in working with RDAs to increase employer; engagement in HE. Seamless progression from FE to HE. The developing role of the RDA with respect to strategic development in research and postgraduate studies in HE & business. For example, support for Knowledge Transfer Partnerships and encouraging greater SME engagement. Support for HE based Regional Science Learning Centres. Management, leadership and entrepreneurship programmes.

•

• • • • • •

• •

Key examples of activities and actions relevant to the RSPA include: • HEFCE/LSC Lifelong Learning Networks (LLNs) are potentially a key way of developing a seamless skills escalator. SEEDA has already supported the development of one successful lifelong learning network bid, and is encouraging others. This could include for example, support for higher level technical skills at levels 3 and 4 to support proven regional demand. The “e-Skills degree” in Information Technology Management, brokered by SEEDA and eSkills UK in response to employers needs. The Higher Education Entrepreneurship Group (HEEG) which supports many different types of staff engaged in promoting, teaching and engaging in, entrepreneurship within Higher Education Institutions. Bursaries to support SETi teacher CPD through Science Learning Centre. Development of the multiversity concept with co-location of HE and FE e.g. Ashford, Medway, Hastings & Milton Keynes.

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• •

EVIDENCE BASE Find below a brief analysis of the health of the South East labour market and associated skills issues: In terms of balance and quality of jobs measures the SE outperforms most other UK regions.

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The region scores very well on the proportion of employees engaged in high-level occupations earning levels, second only to London on both measures. The SE has among the highest share of employees engaged in high technology manufacturing, medium technology manufacturing or high technology knowledge intensive service sectors. In terms of productivity and performance measures, The South East is one of the most productive regions in the UK. Measures of gross value added per filled job, output per hour worked and gross value added per person employed in manufacturing are above those of all other regions except London. In much of the region, current rates of unemployment largely reflect frictional labour market conditions (eg movements between fixed term /temporary jobs or people entering the labour market) rather than structural issues. Whilst the region’s economy continues to do well against these key measures, there is some indication (eg in terms of most recent increases in the proportions of employees working in high level occupations) that the rate of improvement is not as high as that experienced in other regions and there has been a convergence between the South East and its neighbouring regions. In recent years other regions have begun to catch up with London and the South East, and the most recent data on gross value added per head suggests that the rate of growth in this measure was lowest within the regions (including the South East) in which its overall value was greatest. Maintaining further growth in jobs, employment and output in the South East will become increasingly more challenging, as the region is already close to full employment and more productive than nearly all other regions across the UK. Looking at the longer term, it is difficult to see how the South East labour market, as a whole, can increase employment activity much further. It is already has a highly flexible labour market and has among the lowest rates of unemployment of any region; while the labour supply is likely to be restricted by an ageing population and further expansion in post-16 education. Areas in scope for improvement vis a vis other domestic regions relate to equity of employment, both locally and in terms of individual group, eg female, ethnic minority and older worker employment rates. Skills are essential to the innovation process. The UK and the South East are facing serious challenges on SET (Science, Engineering and Technology) skills. For example in the six years from 1994 to 2001 science undergrads have risen from 186,000 to 231,000, however disaggregation of these figures shows a drop from 75,000 to 65,000 in numbers of physical science, maths and engineering undergrads. Chemistry undergrads fell from 6,802 to 4,262. The aggregate rise was due to increased uptake of medicine, biology and computer sciences but all these too have declined since 2000/01. Apprenticeship take up levels at advanced level 3 continues to slide and this could lead to further shortages of skilled trades’ people who are an important element to underpin the knowledge economy.

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APPENDIX 3 (Cont’d) The SE continues to under-perform in comparison to other successful global regions- the South East ranks only 34th out of 40 global high-performing regions in terms of GDP per capita and only 35th in terms of labour productivity (Huggins). Similarly, prosperity is not evenly distributed across the South East and this masks significant pockets of deprivation.

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Extracts from West Midlands RSP Response to Skills White Paper
ANNEX B - REGIONAL SKILLS ASSESSMENT – KEY ISSUES The Regional Skills Assessment was completed by the Regional Observatory under the guidance of the RSP Data Group. This Annex provides a summary of the key issues and the attached table lists the key messages for employers, individuals and skills providers. KEY ISSUES Trends in economic performance Many of the Region’s key manufacturing industries have been adversely affected by an increasingly price sensitive market and intense competition from producers in locations elsewhere in the world with a lower cost base. However, this is being offset by increasing levels of entrepreneurship and new business formation, job creation and wealth generation in other manufacturing industries such as motor vehicles and components, aerospace, jewellery & furniture, computer hardware and food & drink as well as in construction, transport & communications, ICT, research and development, professional & financial services, retailing and hotels & catering. The Region’s most successful companies are looking to compete through the quality of labour rather than the cost and the proportion of highly qualified ‘knowledge workers’ in the Region’s workforce is increasing. The Region’s knowledge economy remains weak, however, relative to competitor locations in the UK and overseas. Employment trends and prospects These developments are being reflected in a long-term, occasionally dramatic, shift in the balance of employment in the Region from manufacturing to services, and private sector services in particular, and an increasing emphasis on higher level managerial, professional and technical roles and customer facing sales and personal service roles. This restructuring is set to continue over the next decade. There will still be a significant demand, however, for employment in sectors such as manufacturing and construction and in manual and unskilled occupations due to the need to replace staff leaving due to job moves or retirement. The demand for skills and qualifications The long-term trends require access to a pool of highly skilled people in areas such as entrepreneurship, creativity and design and in management and leadership. There is a requirement for both vocational, technical and practical skills to exploit new technology and the generic and transferable skills required to manage people and performance, solve problems and devise solutions, negotiate, influence and think strategically, work in a team, communicate effectively in verbal and written form and provide excellent customer service. These emerging skill needs are paralleled by an increasing demand for higher level qualifications. Over the next decade there will be a 30% increase in demand for degree level qualifications and a 20% increase in demand for higher degrees. At the same time there will be a 40% decrease in demand for those with no qualifications. In a workforce of 2.7 million this requires significant reponses from employers, Higher Education, Further Education and training suppliers. Skill gaps and deficiencies The existing workforce often lacks the skills employers require to develop and grow. A third of the Region’s employers cite such gaps. In the Region’s fastest growing sectors and industries companies highlight deficiencies in both softer generic skills and a range of more technical, job-

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specific skills such as craft skills, manufacturing and production skills, the use of ICT and other new technology, processes and methods.

Workforce attainment levels The West Midlands has the highest proportion of the workforce with no qualifications, performs poorly against other regions in terms of A-level points scored and has the lowest proportion of high achievers qualified to NVQ level 4 or above of any English region. While the situation is improving the gap between regional qualification attainment and the national average is still widening. A particularly high proportion of older people people from minority ethnic communities and people living in deprived urban areas are most likely to lack formal qualifications and have poor basic skills, leading to their worklessness and ecnomic marginilisation. Graduate retention The low levels of human capital within the Region are exacerbated by a failure to retain those graduating from West Midlands universities within the economy. More than half take a job outside the Region after graduating and the figure is nearly 70% in professional & financial services and manufacturing. In addition, the skills and potential of many of the graduates that are retained in the Region are not fully utilised with a high proportion employed in lower skilled ‘non graduate’ jobs. This reflects both a lack of the employability skills and attributes among many graduates and a failure on the part of some employers to take full advantage of this key source of skills. Recruitment problems and skill shortages Many companies are struggling with the recruitment of skilled and experienced people from the labour market. While some employers highlight shortages of applicants with the required skills, relevant experience, qualifications and motivation and attitude as a cause of recruitment difficulties, there are often a range of other issues and barriers. Many employers face a lack of applicants due to negative perceptions of their sector as a career choice relating to issues such as a requirement for shift working and/or unsociable hours, poor terms and conditions, a lack of job security, limited opportunities for progression or a history of employment contraction e.g. the motor industry. Demographic change and the supply of skills If these recruitment problems are to be addressed, employers will need to exploit those sections of the population that represent a growing source of labour and skills. Minority ethnic communities are and older people are set to make up an increasing proportion of the workforce over the next decade. While our case study evidence relating to the retail sector highlights good progress at an individual company level, overall only a limited proportion of employers are targetting these groups in their recruitment and they are under-represented in the workforce and over-represented in unemployment and economic inactivity. Labour market disadvantage and the supply of skills While many of those in work lack the skills and qualifications they require to develop their careers, there are also many people within the Region who are unable to access employment and attain even the first rung of the career ladder. These people, at the margins of the labour market,

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represent a considerable untapped resource for employers. Research relating to the East Birmingham & North Solihull Regeneration Zone illustrates that low levels of skills and qualifications combine with other inter-linked issues relating to the availability of key services such as childcare and transport and less tangible attitudinal, motivational and cultural factors to restrict their ability to access the labour market. The region has the third highest rates of unemployment and economic inactivity in England. Rates of unemployment and inactivity are highest in deprived urban areas, and among those groups growing particularly rapidly in the Region’s population – older people and BME communities. There are also significant numbers of young people not in employment, education or training, concentrated in urban areas. Employer investment in training and workforce development Given that the Region’s workforce is often deficient in the skills employers require and that many employers are encountering a range of problems when looking to recruit from the Region’s labour market, the up-skilling of the existing workforce is vital. However, employers highlight a range of issues that inhibit their ability to invest in training and workforce development. The evidence suggests that, while in the majority of cases appropriate training is available, there are issues associated with the timing, mode of delivery and affordability of training. For self employed people and sole traders these issues constitute particularly significant barriers to participating in training. Individuals’ investment in learning It is those most disadvantaged in the labour market that are least likely to develop their skills. Older people, people living in deprived urban areas, the most poorly qualified and those in low skilled jobs are least likely to be active learners and have the least positive attitude to learning. Source: Regional Observatory, DRAFT Regional Assessment

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Rt Hon Alan Milburn, MP House of Commons London SW1A 0AA Reference: M29646/5 Your Reference: AM/km2005K

Thank you for your letter of 1 December 2005, on behalf of Tim Balcon, Chief Executive of Energy and Utility Skills. Mr Balcon writes concerning the skills shortages the Power Industry is facing and enquires whether posts within the sector would be eligible for addition to the shortage occupation list. Can I first thank Mr Balcon for bringing this important issue to my attention. Perhaps it would be useful if I explain the background to the skills shortage occupation list, to which he refers. All work permit applications to employ overseas nationals in the UK are assessed against a strict criteria and we normally only issue permits for posts at National Vocational Qualification (NVQ) level 3 or higher, and where no resident or European Union labour is available to fill the post on offer. To satisfy this second requirement we expect employers to provide evidence that a full labour market test has been conducted by advertising the post before the issue of a work permit can be considered. Only in certain circumstances is this requirement waived, one such case being where the post is recognised as a skills shortage and is listed on the shortage occupation list. The shortage occupation list is administered by Work Permits (UK) on behalf of the Home Office. Posts are only added to this list where it is established, through robust labour market research, that a recognised national shortage exists of certain skills. To assist in the analysis of this data, Work Permits (UK) currently manages five Sector Advisory Panels, which cover the main industry sectors. The panel membership is formed from key stakeholders in the sectors, such as professional bodies, and its main purpose is analyse

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relevant labour market research and make recommendations to Work Permits (UK) on which posts should be included on the shortage list. One of the current Sector Advisory Panel covers the Engineering and related occupations, and this may well be an appropriate forum at which to discuss the skills issues Mr Balcon raises. In order to take forward this issue promptly, I will arrange for officials in Work Permits (UK) to contact Mr Balcon to discuss the matter in full.

Charles Clarke

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Extracts that are relevant to Norman Lamb’s FOI request from Skills in the Chemical and Chemistry-Using Industries briefing Annex 1

The Current Skills Landscape
Motivation to Address Skills 1. Together with innovation, enterprise, competition and investment – skills are a key driver of productivity and are central to UK’s competitiveness. 2. Skills underpin the ability to innovate and in turn innovation drives the demand for better and higher skills levels. Alignment of innovation and skills policy is vital as action on one is less effective if not supported by action on the other. However, within the current framework of the technology strategy, skills sit outside the remit of the developing Knowledge Transfer Networks (KTNs) and therefore outside the activity of the CIN. 3. Employers will address skills issues for a number of reasons, for example: • • • To satisfy regulatory requirement – ie Health and Safety, hygiene; Operational requirements – ie the introduction of new machinery or processes; The need to address market demands – productivity, competitiveness.

4. DTI’s interest in the skills agenda is underpinned by the need to maintain or improve the competitiveness of individual UK based industries and to develop a workforce equipped to tackle the challenges of emerging industries and new technology/innovation. 5. The skills landscape is inevitably complex given the DTI is aiming to address the needs of employers in 25 sectors, across 9 geographical regions. DTI’s strategy aims to streamline the front-end service to employers through: • • • Devolution of management of Business Link to RDAs; Bringing together business support and training at a regional level through the formulation of Regional Skills Partnerships (RSPs)37; and The integration of supply at a local level through the implementation of a customer driven National Employer Training Programme (NETP)38.

RSPs are partnerships lead by RDAs to bring together LSCs, Job Centre Plus, SBS and Skills for Business Network (SfBN) and other regional partners to coordinate adult skills, workforce development, business support and other labour market services to support the achievement of RES. They are central to the development and delivery of a demand led system to meet demand on a regional basis.

37

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Skills issues within the Chemical and Chemistry-using Sectors 6. The Chemical Innovation and Growth Team and the Chemistry Leadership Council’s Skills Network Group were broadly in agreement on the issues facing the industry in the coming years. 7. If the UK based chemical and chemistry-using industry is to compete on the global market it must: • • • Attract and retain high calibre people with high level skills; Achieve an appropriate balance of academic and vocational skills; Draw on the widest possible pool of people and recognise the benefits diversity brings to the innovative capacity (ie a move away from the current white middle class dominated workforce).

Prohibitive Environment 8. The capital-intensive nature of the industry pushes a focus on capital rather than people investment. If the UK based industry is to maintain a competitive edge and increase productivity it must attract and retain high calibre people with high skills levels. Its poor reputation and perception of continual downsizing has resulted (in some instances) in a very competitive environment for the best recruits. 9. Equally, the transient nature of company ownership and the fragmented nature of the industry have led to short-term operational goals and a lack of critical mass in training. 10. The chemicals and chemistry using industry must take responsibility to train and equip its workforce with the appropriate skills to match the changes in the market and in technological developments. 11. The environment and culture within the industry has led to difficulties in progressing the skills agenda, which can be summarised in the following headlines: • The industry currently has significant skills gaps at both plant operator and graduate levels. There are at present too few people trained and working to a minimum standard of NVQ Level 3. Up-skilling to this level is clearly a major challenge to the industry and one, which they appear reluctant to tackle;

NETP are offered through independent and impartial brokerage service acting on behalf of employers and linking development to relevant training provision based on business need. NETP will be rolled out across England from 2006 –7 with complete roll out in 2007–8.

38

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•

It is accepted that in 10 years time the industry will need a smaller highly skilled, and technology literate workforce which is equipped to operate flexibly across a number of existing skills boundaries; Human resource is judged by a large part of the industry as a cost rather than an investment, with operational saving often falling on training and development rather than other areas of the business; The industry has poor links to the supply of training and development and finds the landscape confusing to access.

•

•

Current Landscape 12. The current landscape for skills development is often not seen by employers as customer focused – ie too many organisations, too many overlaps and a lack of industry engagement. 13. The implementation of the skills agenda has changed over a number of years but the roots of the problem remain the same. While it is difficult to anticipate an end to the skills dilemma it should be possible to educate industry in how to achieve the best from their workforce without the endless dangers of loosing talented employees or forcing increases in salaries beyond the means of the organisation (the dilemma of investing in people is particularly pertinent to SMEs within the industry who’s operational skills requirements may be lower then NVQ Level 3) 14. A summary of each of the key players currently working on the landscape and the potential issues/overlaps is attached.

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Westminster Hall Debate: Maximising Women’s Skills in the Economy. 10 Nov 2005. The Government has put productivity at the centre of the economic agenda, and the DTI's number one PSA target is to narrow the productivity gap with our key competitors. Using the preferred measure of GDP per hours worked, the productivity gap with each of our peers remains substantial: the gap with Germany is 12 per cent; with the US it is 14 per cent; and with France it is a staggering 29 per cent. Improving productivity will allow us to produce greater out put, which will allow us to support higher wages and profits, better public services and a higher standard of living. Today is a good time for this debate on how we can maximise women’s skills in the economy. The up-to-date pay gap statistics have just been released and it is now 13.2%. The pay gap has fallen to its lowest level for 30 years – to just 13.2 per cent measured by the median and 17.2 per cent by the mean. It also illustrates that we need to go further and faster to reach the situation where gender does not determine how much you receive an hour. Closing these gaps would raise levels of prosperity in the UK. Reducing skills shortages would be a key driver in this. One of the main reasons for the pay gap is that at present we have significant occupational segregation – women are over-represented in certain types of low-paid jobs, and under-represented in other sectors, such as Science and Information Technology. If there was no segregation of men and women in certain occupations, this could increase GDP by between £2billion and £9billion a year – assuming that there would be no displacement of workers from higher skilled occupations. Greater equality of treatment could attract more women into the labour force, and encourage some part-time workers to work full-time. Research shows that 25 per cent of women who work part-time would be prepared to work full-time if better pay and more flexible working

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conditions were on offer. There would be additional GDP benefits of between £14billion and £20billion. These figures, added together could amount to some 3 per cent of GDP. This is a significant figure and it is important that we have a good understanding of the work situation that means we are missing out this benefit to the economy. Girls are doing well in education today, with more young women likely to gain degrees than young men. But this level of attainment is not carried through into work. Instead, many women continue to work in lower skilled, lower paid jobs and the economy continues to operate below its productive potential. Encouraging women into higher skilled, higher paid jobs would help to reduce the current skill shortages, and ensure that women have the opportunity to reach their potential. Research by the University of Manchester found that women returning to work from caring or maternity leave on average, experience a 16% drop in wages due to being “over-qualified” for the part-time job they are undertaking. We commissioned research with the London School of Economics which showed that higher skills (in terms of qualifications) raise productivity and lead to higher wages for individuals. Also, organisations with a greater proportion of female and part-time workers had lower productivity and wages - partly because part-time workers were being paid less than their contribution should merit. Recent research by the Equal Opportunities Commission and Sheffield Hallam University found that over 50% of women in part time work are working below their skill level. Many of their managers were not aware of this information. A further 30% of women in part time work felt that given training they could increase their skills level. Skill shortages are higher in sectors where there is a ‘gender dominance’. There is currently an annual estimated shortfall of 29,000 plumbers, with an extra 10,000 needed for engineering apprenticeships. Flexibility at all levels of the career ladder is important if women are to retain skills, particularly since tho se at the higher end of the scale are the greatest contributors to productivity gains, for companies and for the economy. The Work and Families Bill, published on 19 October 2005, will extend the scope of the flexible working law to carers of adults.

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The Women and Work Commission will be issuing its report on the ‘gender pay gap’ in January, and from my regular discussions with Baroness Prosser Chair of the WWC, I know the Commission is looking at practical ways that will make a difference to women ’s working lives. The WWC key task is to look at “ways of closing the pay gap within a generation”, but I hope we will see significant progress far sooner than that. Information technology is at the heart of the UK economy and a key source of business competitiveness. It currently accounts for almost 5% of the total UK economy and is set to increase. Employment in the IT industry, too, is set to grow at 5 to 8 times the UK average over the next decade. But the sector is at a disadvantage when only a 20% of its workforce are women, as compared to just under half of UK’s national workforce. It is predicted that women will make up the majority of the working age population by 2018. Getting more women into IT is a “must” for the workforce, business profitability and growth, and the economy. Blackberry, and women’s networking group Aurora, recently hosted the ‘Women and Technology Awards 2005’ in October. I was very pleased to be invited to present one of the prizes and speak on the importance of the event. Awards such as these, organised by industry, recognise and celebrate women's achievements and raise awareness that women have talents to offer. An alarming number of women with Science, Engineering and Technology (SET) qualifications are not working in the SET field. Currently, 70 per cent of women with qualifications in these subjects are not in science, engineering or technology-related employment. Last year we set up the UK Resource Centre, to help women in SET. I was able to visit in early September and see for myself the work they do. I met women who had been supported by the Centre and learnt how they were able to use their knowledge and skills in science and technology in their work. At the centre I had the opportunity to meet employers, some from the construction industry. Too few women go into construction and too often those that do face prejudice and discrimination. One employer told me that in his experience women in construction jobs were often more capable than men but were assumed to be less so.
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Fortunately, we have important allies in the business world taking occupational segregation seriously. Cosmetics firm, L’Oreal and the UK Resource Centre announced in July a programme to address some of the issues faced by female scientists when returning to work after a career break. Three cash bursaries of £10,000 pounds each, jointly funded by the partners, will be granted to women scientists each year. The UK Resource Centre is doing excellent work and I invite you to explore their website if you have not already done so. I’m sure we were all delighted that London won the Olympics for 2012. I hope that we can ensure that the Games can become a springboard for women in science, engineering and technology. This is an excellent time for women to get involved - not just as athletes but also in senior roles in all aspects of making the Games happen. It is striking that while female entrepreneurship is at 89 per cent of the level of male entrepreneurship in the US, it is only 46 per cent of the level of male entrepreneurship in the UK. If we had the same rate of female owned start ups here as they have in the US, we would have 750,000 more businesses. The case for doing all we can to boost women’s enterprise in the UK is clear. It is not simply a matter of equality of opportunity, but an economic imperative if we are to capitalise on the potential women have to offer. The Small Business Service and ministers are consistently working to raise the profile of Women’s Enterprise, following on from a dedicated Women’s Enterprise PR campaign. This arises out of the recommendations of the Strategic Framework for Women’s Enterprise and the women’s enterprise content of the Innovation Report. We successfully held the 'Women's Enterprise Online Summit' in June – to which 5,000 logged on. This aimed to motivate more women to start their own businesses, and tap into an exciting community of networking, support, useful resources and targeted services. This provided a worthwhile opportunity for women to get answers to such questions as: How can I speak to like-minded women? Who can I speak to about my business idea? Who can help me start and grow my business? What resources are available to support me on this journey? The campaign is in addition to a range of activities within the Women’s Enterprise programme, running throughout 2005.
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The next few months see the rollout of phase two of the ‘Case for Women’s Enterprise’. This initiative will be principally aimed at mainstream business support providers. They may have limited experience of providing targeted services for women, and may not have previously considered segmenting their client needs using a gender perspective. The Government has a strong commitment to increasing the number of women starting and growing businesses. To ensure that Governmentfunded business support services are accessible and appropriate to their needs. Government is also committed to maximising the skills of women in the economy. We will continue to work to improve the chances of women in the labour market. [END]

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[CLOSING SPEECH] This has been an excellent debate on an important issue etc Barriers that women face have to be broken down. One way is by ensuring young girls have access to the right skills, such as at the Turves Green Girls Technology College which I visited when I was on the Education Select Committee, which actively seeks to encourage its pupils to engage with the technology, design and science curriculum. Regional Development Agencies are also key players. I’m delighted that many RDAs are taking this role seriously, some such as the East Midlands Development Agency have appointed a women’s champion. Others such as Yorkshire Forward have included diversity as a key priority in their recently revised Regional Economic Strategy. Skills form an essential part of the approach and they will take action to promote qualifications and careers in key areas to “non traditional entrants” such as encouraging more women into technology or craft based careers. Tackling occupational segregation and the gender pay gap isn’t just the right thing to do because of fairness, but it makes economic sense too. Maximising women’s skills in the economy could bring economic benefits worth up to 3 per cent of GDP, which equates to the total value of UK exports to Germany. I leave that killer fact in your minds as we start our debate!

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Extracts that are relevant to Norman Lamb’s FOI request

Proposal to the Offshore Training Foundation

Project Title: “Options for Getting Started, Opportunities for Getting On in the oil and gas industry Proposal: To develop an innovative and comprehensive pan –industry attractiveness campaign to support the recruitment and retention of a workforce of the appropriate capacity and capability to meet the current and future business needs and opportunities of the Oil and Gas Industry.

Submitted by: Annette Thomas: On behalf of the Workforce Capacity & Capability group

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1.

Introduction

The oil & gas extraction industry faces a significant challenge in attracting talented people both at present and in the future. The needs range across all business areas e.g. drilling, craft, technician and graduate, commercial and financial skills. The industry’s 3- year graduate attraction programme was reviewed in April 2005, when the views of UKOOA members and other stakeholders were canvassed. The findings from UKOOA’s consultation included concern about the cost and effectiveness of the trailer together with the need for the industry to target a wider audience that just undergraduates. Industry Leadership Team (ILT) then tasked their Workforce Capacity and Capability (WC+C) Group with making recommendations about the future of the Graduate Attraction Trailer.

2.

Description of the Project

This project seeks to link the industry’ needs described in the PILOT Business Plan to a set of actions, arrived at through consultation with the target groups, that improve the industry’s ability to attract, recruit and retain people.

“To promote the attractiveness of the industry as a place to work in support of the attraction, recruitment and retention of a workforce of the size and capability to meet the current and future business needs and opportunities.” Objectives and Target Groups
Project 5 Project 6 Project 7 First Job Destination for school leavers and graduates Recruiting from non-traditional sources, which captures the need to look at gender, ethnicity, and the barriers to entry for skilled workers from other sectors and an international workforce. Retention and Development of Existing Workforce: recognition and reward.

The project will provide the industry with a set of recommendations that reflect an informed and reliable view about how to work with the target groups on the basis of fact not anecdote.

3.

Rationale

A wider and deeper campaign is needed than just targeting undergraduates. The numbers of people and the diversity of skills and behaviours the industry requires now and in the future means a narrow focus on graduates is not enough. We need to increase the range of our target audience, and this will require an understanding of the most effective communication methods and media for each group. It is

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therefore necessary to develop a new approach that allows the industry to invest in fit for purpose solutions.
4. • • • • Objectives To develop a pan- industry strategy/framework that is populated by activities that make the oil and gas industry a more attractive option to work in for the groups identified To provide information on what the industry offers that is tailored to specific groups. To build the standards, qualification, entry routes and best practice to remove the barriers that exist or are perceived to exist by people trying to enter the industry To promote lifelong learning as a way of maintaining employability for individuals and a fit for purpose workforce for employers in a business where change is the only constant.

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5.

Project Activities
5.1 Assemble an appropriate Steering Group, made up of individuals with knowledge, experience and networks of the target groups so as to prevent “industry groupthink” and to allow a real understanding of the target audiences any industry attractiveness campaign would need to address.

5.2

A 2 -day facilitated event to determine for each of the project areas 5,6,and 7: • • • The target audiences that the industry feels should be addressed. The appropriate key messages to be used with specific audiences The type of activities and media that would be most effective for use with particular target audiences.

For example: The Oil and Gas industry as a first careers destination (Project 5) Potential Target Audiences Primary • Teachers • Pupils Secondary • Teachers/science/technology/careers • Pupils Universities Undergraduates Post Graduates Careers Service Lecturers Schools Recruiting from non traditional sources (Project 6) • Women and ethnic minorities. • Skilled workers from other sectors • International workforce Retention, recognition and reward. (Project 7) • Technicians – wanting to progress • Conversions – from within the industry • Graduates – seeking Charter / Professional status 5.3 Small work groups to take findings from the event/workshops and develop those into recommendations, which would provide a guide on cost/time and feasibility of implementation. • Schools/Universities – ESEU/SQA/Revolution Education/RGU/Keele Uni/ • Skilled workers/Women/International – CSSL/Operators/Supply Chain/ WC+C workgroup • Retention – post experience/lifelong learning – Energy Centre/SPE/chartering Institutions To build on the success and recognition of the Graduate Attraction “Opportunities Brand” using he work already done on behalf of the ILT Skills

5.4

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Group, which formulated a branding concept with the elements would be revisited. • • • Options – to be used in schools and for school leavers. Opportunities – for undergraduates and postgraduates Outlook – for those in the industry seeking development of those in other industries that would like to join the industry. If developed the branding would support the phased roll out of activities for all the groups. This would be cost effective but also have a cumulative impact as people begin to recognise the brand belongs to oil and gas whether it is applied to apprentices, graduates or job changers. This strategy allows diversity to be woven into everything we do instead of being treated as a stand-alone issue. 5.5 Produce a strategy/framework to show how a coordinated and comprehensive approach to making oil and gas a more attractive place to work, job option or career by having a flexible suite of complementary activities available targeted at different parts of the potential and existing workforce.

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Inspire Scholarship Launch: Wednesday 5 October 2005 Introduction/Theme The most outstanding construction projects don’t happen by accident. They involve an enormous amount of careful preparation and commitment by a whole range of people and professions. Having been involved in the role of "client" for Sir David's Hall in Cardiff and more recently for the Saha Hadid designed Cardiff Bay Opera House, those comments are not made lightly because I've seen what a difference it makes and I’ve seen that professionalism and teamwork in action. That applies to every aspect of the construction process, not least to the people aspects which is why skills and training are so important. The construction industry continues to grow with last year showing 3% growth over the previous year. At 8.3% of GVA construction is the largest industry in my portfolio. And it has a wider importance. When we arrived in office in 1997 we were committed to improve public services with the NHS and education at the heart of our hopes and aspirations. New construction is an important part of delivering the policies and investments of this government and it also offers the proof to the public of our commitment to better public services. So it is vital that we get it right. ConstructionSkills has a key role to play in ensuring that the industry has qualified, competent people to deliver the Government’s ambitious expenditure programme. With the successful Olympic bid for London in 2012, Government will be working closely with you to deliver the best games ever, to create a legacy in terms of sustainable development, skills and regeneration for that

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area of East London. The high profile construction of the Olympic Games provides an excellent opportunity to increase apprenticeships and encourage a new generation of people to join the industry. There will be significant opportunities to recruit and train local people. Again, I’ve seen major projects that take no account of the potential for the local economy and the local community, and others where – without in any way blunting the sharp edge of competition – the local community and the region have benefited. When we started on the regeneration of Cardiff Bay there were fears that it would be something done to the communities of south Cardiff – and I speak with some feeling as I worked for eight years to get the legislation through Parliament to build the Cardiff Bay Barrage – but there was co-operation between all concerned to provide a local training centre to impart building s kills to unemployed local people. That was part of the project from Day 1, for all of us including the major construction companies involved in the scheme. Thames Gateway and the 2012 Olympics are much bigger, so the benefit has potential for every region of the country as well as the local area, if we make sure we have the objective of sustainable development in view as we take the project forward. With my support and encouragement the Strategic Forum for Construction has set up an Olympic Task Group. The Task Group is an overarching strategic group to ensure the adoption of best practice across Olympic construction projects and I have asked Peter Rogers to chair the Group. It will develop a supply side charter, identify and commission research into factors critical to the success of Games and to act as a “collective conscience”. This represents a very valuable contribution to the Olympic effort and I intend to work very closely with the Group

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The industry will require a constant flow of new recruits, who must be inspired to make construction and the built environment industries one of their top choice careers. Attracting graduates into technology and engineering professions generally represents a huge challenge. Inspirational Leaders and Managers Inspire Scholarship is an apt term for your initiative. Many of today's graduate entrants will be tomorrow's industry leaders. For the industry to retain the best, it is essential that they are inspired, motivated and developed. That is why the inspirational leaders and managers are needed now. The 2005 Skills White Paper has highlighted the need for improvement with one in three employers reporting a skills deficiency amongst their managers. The Skills for Business Network has established champions to ensure that leadership and management is given priority in each sector. DTI’s Inspired Leadership programme aims to improve UK management capability at all levels with optimum employee engagement, to achieve even higher levels of innovation & performance. Construction in the context of wider science and innovation agenda The construction industry is part of a broader industry canvas. The Government has set us ambitious goals for the future in the 10-year Science and Innovation Investment framework. The Government's long-term objective for the economy is to increase the level of knowledge intensity in the UK as measured by the ratio of R&D to national gross domestic product, from its current level of around 1.9% to 2.5% of GDP by around 2014. Need to bring in talented scientists and engineers

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If we are to deliver on our ambitious construction programmes it is important that we have an expanding flow of creative young technicians and engineers into our workforce. I n spite of the general perception we have been making steady progress. Today there are 120,000 more young people studying for science and technology degrees than in 1997/98 and the percentage of the total number of students taking science and technology degrees has gone up from 38% to 41%. These include a 78% increase in those studying computer sciences and a welcome 38% increase in those studying mathematics. After 10 years of decline, applications for building and civil engineering degrees have began to show improvement from 2002. Data from UCAS published earlier this year showed that applications for construction-related degrees is rising significantly year on year. Civil engineering degree applications up 9%; architecture applications up 16% and building applications up 30%. Applications for 2005 for Architecture, Building and Planning courses increased by almost 10%. How the Construction industry is responding to the challenge? I would like to congratulate the construction industry on the huge efforts you are making to make a difference. You are prepared to invest in the future of your industry, by investing in the workforce of your future. Your positive image campaign; National Construction Week. and the Constructionarium – all extremely successful programmes and are changing the perceptions and delivering positive results.

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I am pleased to be here to help you celebrate the first year of the Inspire Scholarship Programme, and applaud the fact that there is a healthy intake of both men and women into the industry.

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SPEECH BY GERRY SUTCLIFFE ON THE OCCASION OF THE THIRD AUTOMOTIVE ACADEMY ANNUAL LECTURE: MONDAY 21 NOVEMBER 2005 Good afternoon Ladies and Gentleman and thank you Joe.

Alan Johnson has asked me to send his sincere apologies but he has been called to Brussels on Presidency business. I am delighted to represent him here today and to address such a distinguished gathering from the automotive industry. This event marks another significant milestone in the life of the Automotive Academy. Automotive stands at the forefront of global process and product innovation. It is a truly dynamic sector with a dynamic workforce and dynamic leaders. And here in Britain, we’ve got the best car and commercial vehicle makers in the world. Our car production is currently running at around 1.65 million units a year - equivalent to the peak number of cars that rolled off the production lines in the early 1970s. And in 2004 commercial vehicle production exceeded 200,000 units for the first time since 1998. The sector accounts for over 9% of our total export of goods. Over the last 5 years we have exported, on average, over a million cars a year – a fivefold increase in real terms since 1986. Japanese and American manufacturers import British built cars into their home markets. And over 70% of UK car exports go to Europe.

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You employ a quarter of a million people in some 3250 businesses and together you contribute around £8.5 billion of added value to the economy; or, put another way, 6.2% of all manufacturing added value in the UK. There can be no doubt about the great importance of automotive manufacturing to the UK. And there is even more good news from our companies. For example: In 2004 Ford Motor Company invested almost £1 billion in new plant and facilities in the UK. £325 million is being invested in Ford’s state-of-the-art Dagenham Diesel Centre, the company’ s global centre for diesel engine development and production. A quarter of Ford’s entire global engine requirement is sourced from the UK BMW Group, which has invested £280 million in MINI production since 2000 will invest a further £100 million between now and 2007, creating 200 new jobs. MINI is on sale in more than 70 different countries. And BMW’s Hams Hall plant is set to become BMW’s global four-c ylinder engine centre. Bringing jobs back from Brazil. Honda is the UK’s largest exporter of passenger cars to America. Over 700,000 Civic’s have been built at its Swindon facility in the last ten years with more than 60% exported. Toyota’s substantial investments have seen production at Burnaston rise to a quarter of a million units last year with Avensis being exported to Japan. VW has invested £500 million in Bentley at Crewe in a purpose built facility bringing together the latest technology with unprecedented levels of craftsmanship. Production is

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expected to rise from 7,000 vehicles today to 10,000 in two years time. These are just some of the great success stories in the UK. But what lies ahead? Let me reassure you that manufacturing will matter, as much tomorrow as it does today. It is crucial to our future as a high technology, high wage, knowledge driven economy. Our economic success. Our prosperity. We live in a highly competitive world. One where new markets, new places for production, new skilled workforces emerge with extraordinary rapidity. A world economy where businesses, organisations and people cannot afford to stand still. An economy that demands constant flexibility, dynamism, innovation and enterprise. The challenges are considerable. Globalisation and overcapacity mean there will always be turbulence, especially in the supply chain. You are under relentless pressure to align your technology, product and business performance to deliver customer value at even lower cost. The car itself will need to change if it is to deliver sustainable mobility. Change the way it is designed, manufactured and delivered. Maybe even the way it is owned and used. As was seen at the G8 Environmentally Friendly Vehicles Conference held in Birmingham just ten days ago, the momentum for change is gathering pace. I want the UK to be at the forefront of this change. Future success will depend on the widespread uptake, throughout the UK industry, of world-class best practice, lean production techniques and exemplary quality, cost and delivery performance. It will depend on R&D, innovation and new product introduction. It will depend on new value144

added competences in the supply chain. And the emergence of new technologies such as zero-prototype design, advanced electronics, higher voltage systems and telematics. Bio-fuels and eventually hydrogen will bring their own technological challenges. It will depend on better supply chain management, new and improved operations for purchasing, logistics and lean distribution. Facilitating genuine build-to-order capability and customer satisfaction. All of these things are key characteristics of a successful automotive manufacturing industry. And each and every one of them is underpinned by skills. Skills on the shop floor. Skilled project and operations managers. Skilled engineers and technicians. And of course skilled leaders. Leaders who can make the right decisions at the right time. I am not talking about the run-of-the-mill here. Nor am I talking about skills to fill short-term vacancies. But skills for long term needs. World-class skills. Pervasive skills. Throughout companies. Across the sector. This is what the Academy is all about. Putting the needs of business centre stage. Acting on the demand side. Articulating the sector’s needs in a simple and coherent way. Enabling colleges and training providers to be more responsive. Facilitating skills enhancement. Achieving more ambitious business strategies. And ultimately, translating that into world-class business performance.

The Academy is now well and truly established as part of the SMMT (Society of Motor Manufacturers and Traders) family. DTI have pumped £13.5 million into this new business, honouring our pledge made in 2002 to Sir Ian Gibson and the Automotive Innovation and Growth Team. And our pledge to you.
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A powerful Board has been established, led by Joe Greenwell Vice President, Government Affairs, Premier Automotive Group and Ford of Europe and supported by senior representatives from BMW, Caterpillar, Honda, GKN, MG Rover, McKechnie, Nissan, SMMT Industry Forum and Toyota. And DTI will continue to be an active partner, both on the Board and at operational level. Genuine partnership. Helping to ensure that the Academy develops into a successful self-sustaining organisation. And even more importantly, to bring about a step change in business performance through skills enhancement. For this reason, the Academy’s hub has been established in the West Midlands, co-located with the Industry Forum. And rightly so. The key business improvement training units are squarely based on Industry Forum techniques. Techniques developed by the industry, for the industry. I am confident that this close and important relationship will continue. From this strong foundation, the Academy can look to expand its curriculum. Establish its own credentials. Differentiate itself through the world-class, high quality products, accredited and developed under its brand. Looking beyond to other materials and trainers. Where necessary, developing bespoke courses. Above all, ensuring the Academy generates the capacity needed to meet the demand, without compromising quality. But the Academy also has a role to stimulate demand. Local awareness raising is critical to this. So I am pleased the Academy’s important regional infrastructure is coming together. Supported by the RDAs. Giving access where it is needed. Seven spokes are now in place. In the Midlands, in the Northeast, the Northwest, the Southeast & the Southwest
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of England, Wales and in East of England and London. A further spoke in Northern Ireland will be coming on line shortly. These spokes don’t all look alike. But they must possess two key characteristics. Industrial leadership: stimulating, understanding and articulating local needs. And second: complete knowledge of the local supply of accredited courses.

We all know the world of training and training provision can be confusing. And it can be difficult to unravel the many partners and stakeholders: the Learning and Skills Council; the Sector Skills Council; Sector Skills Agreements. Not to mention the myriad of courses and trainers. Frankly some of these are below standard. The added value of the Automotive Academy is its unique ability to cut through this complexity. Setting national standards and delivering world-class offerings on your doorstep. One stop shopping for automotive skills enhancement, endorsed by the industry. The Automotive Academy is not a palliative. It will make a real difference. Tremendous progress has been made in the last year. The enthusiasm you are showing by being here today is obvious. Your expectations are justifiably high. But the baton has now been passed to you. It is essential you get involved. The Academy needs your commitment. The students of today. The alumni of tomorrow. Taking the next steps to a better skilled workforce. And long-term business success. Now is the time to enrol. I hope you will all take the opportunity to discuss your requirements with Academy staff including Joe Greenwell and Chief Executive Alan Begg over lunch and throughout the afternoon. But first, I have another duty, to introduce our guest speaker. It gives me great pleasure to hand over
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the floor to Dr Franz-Josef Paefgen [PEFF-KEN], Chairman and Chief executive of Bentley Motors, to deliver this year’s Automotive Academy lecture. Thank you

1510 words – approximately12 minutes at 120 wpm

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SEMTA RESPONSE TO THE “LEITCH REVIEW OF SKILLS” Question 1a: Do you consider the current skills profile of the UK to be adequate? Engineering, science and manufacturing technologies sector employers increasingly need to move to higher value-added products to maintain global competitiveness. As the proportion of Level 2 assemblers/operators in the sector decline substantially, so the supply of skills of Levels 3, 4 and 5 craftspeople/technicians and professionals must increase through the recruitment of new entrants and by multi-skilling, re-skilling and up-skilling the current workforce. Question 1b: What impact does the current skills profile have and what do you consider to be the relative importance of the issues that you have identified? Recent research carried out by the Engineering Employers’ Federation has suggested that employers have identified the availability of skills as having a negative impact on their productivity. This limits their ability to maximise potential in today’s global markets. Question 2a: What do you consider to be the primary drivers changing the skills needed in the UK economy over the next 15 years? Our pathfinder Sector Skills Agreement (SSA), covering the Aerospace, Automotive, Bioscience, Electronics and Marine sectors have identified the five key drivers as: Continuous improvement and lean/process excellence Increasing the supply of skills at Levels 3, 4 and 5 Management and team leadership New product and process development/implementation Supply chain management.

Question 2b: What do you expect the impact of these pressures to be on the types of skills that will be required? The requirement for higher technically competent employees will increase, while demand for lower-level skills will decrease. Individuals who can innovate and update their skills will be in much demand. Question 3: If education and training continues on its present course in the UK, are these future requirements for skills likely to be met? No. However, our pathfinder SSA addresses the serious gaps in demand-side provision that constrains productivity and performance. SEMTA is working with key players locally/regionally, including employers, Centres of Vocational

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Excellence, Group Training Associations, Further Education and Higher Education, University for Industry and Scottish University for Industry. Question 4: What changes in the population’s skills would have the greatest effect on improving the UK’s productivity in 2020? Significant improvements in front line supervisory, team leadership and management skills are vital to support world-class lean operations and process excellence. There is a demand for a better supply of vocationally qualified team leaders and skills gaps among managers extend further across all the SSA sectors in terms of financial management, knowledge management, project management and supply chain management, together with negotiation skills. Question 5: Is it necessary and possible to stimulate demand from individuals for improving their own skills? Yes. Key motivators for individuals to learn include: better career prospects improved team spirit increased salary more confidence to carry out tasks relevant learning for the individual’s financial security.

Demand can be stimulated by: creating e-learning/distance learning at home and in the workplace employee learning representatives encouraging basic skills participation by sensitive mentoring highlighting benefits of learning/training to both employees and employers increasing more local provision promoting learning in the workplace providing monetary incentives.

Question 6: Is it necessary and possible to stimulate demand from employers for skills improvements in their country/their workforce? Yes. Employers are the driving force behind our SSA. They have prioritised skills issues and want to use the “Business to Skills” model to develop their workforce. Government should ensure there is a seamless UK public funding regime in place to support Level 1-5 qualifications in order to encourage more consistent employer engagement. Question 7a: How do you think that the UK’s future skill needs can best be met? In particular, through the skills provided by (i) schools (ii) colleges (iii) universities (iv) training providers and (v) employers? (i) Schools: Employers expect that after eleven years of compulsory education, young people should have acquired a decent level of competence in “basic skills”, such as the ability to use language, apply

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mathematics and use ICT. Other “soft skills”, including the ability to listen and learn, acceptable workplace behaviour - including punctuality and working in a team are essential requisites. Balanced and informed careers advice would go a long way to help employers overcome the prejudice held by many against careers in engineering, science and manufacturing technologies. Linked to this is a need for greater encouragement to young people of all abilities, including the more able, to study science, mathematics and technical subjects, thereby liberating their future career options. (ii) Colleges: the Government’s 14-19 proposals will mean that colleges are going to get engaged at a much earlier stage than is currently the general case. There will be a key role in demonstrating to young people the wider world outside of the educational environment. Colleges will also play an increasingly key role in the delivery of the vocational education element of apprenticeships. Universities: For engineering and science in particular, there is still a significant need for Level 4 graduate recruitment. Employers rightly expect graduates to have a broad range of higher-level skills, including an appreciation of how business works, technical and “soft”. Work experience - either in a gap year or during degree courses - offer such opportunities. Training Providers: the engineering, science and manufacturing technologies sector is very fortunate there is a UK network of Group Training Associations (GTAs) specialising in helping companies, particularly small firms, to maximise the effectiveness of training spend. They provide tailored training support to employers, including apprenticeship programmes, supervisory and management functions. Employers: One of the main roles for employers is in helping to identify training needs and facilitating delivery. Employers can also assist by being “champions” to encourage other businesses, particularly SMEs to develop their workforce.
Employers should actively seek funding support for lifelong learning and be flexible in their approach to individuals wishing to undertake such learning.

(iii)

(iv)

(v)

Question 7b: Do you think that organisations providing education and training should respond to the needs of the labour market? Yes. All organisations accessing Government/Agency-funded programmes should receive support on condition that the funding will be used to provide education and training not only for the current needs of the labour market, but for future needs too.

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Question 8: What are the three things that you think would have the greatest effect on the UK’s ability to provide the skills required to benefit society and the economy in 2020? 1. Better and consistent careers advice/guidance at school/Further/Higher Education. 2. Better links between business and education (school, Further/Higher Education). 3. Government recognition of the true cost of engineering/science-based training. Question 9: Are there any domestic or international examples of good practice that you would like bring to the Review’s attention? Yes - for example there is an adult/graduate apprentice in Scotland who is currently undertaking an Apprenticeship and Higher National Certificate. This is proving most successful both for the individual and employer. Another more detailed example via the vocational route into Higher Education and skilled employment is as follows: David Eaves left his comprehensive school at 16 to undertake a Modern Apprenticeship. David was an apprentice at BNFL in Preston, working towards an Electrical/Electronic Engineering NVQ Level 3 and studying for ‘A’ level Mathematics, when he participated in the Sutton Trust Engineering Summer School at Cambridge University. The summer experience persuaded him to apply to the university and in October 2000 David started a degree in Engineering. BNFL sponsored him during his studies and he also received a Whitworth Scholarship a scheme for engineering graduates with vocational backgrounds. He graduated from Cambridge University with a distinction in his Master of Engineering.

Question 10: How would you like to see the Review building on the existing evidence
base?

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Many and varied studies have already been undertaken (over several years) on skills issues. Employers do not need more fine words - its now time for some concerted action. Our SSA will provide SEMTA and its key partners, including crucially employers, with the vehicle for such action.

Question 11: Are there any additional issues, not covered elsewhere in your
submission but failing within the Review’s remit, on which you would like to see the Review focus its attention? No thanks.

[responsetoleitchreview2.doc]

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COVER SHEET FOR RESPONSES
Contact details of respondent Name: Job title: Organisation: Postal address: Lee Hopley Economist EEF, the manufacturers’ organisation Broadway House Tothill Street London SW1H 9NQ 020 7222 7777 lhopley@eef-fed.org.uk

Telephone no: E-mail:

Response provided for questions 1a 1b 2a 2b 3 4 5 6 7a 8 Type of organisation Business/Employer representative

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Leitch Review of Skills – Developing the UK’s Skills by 2020 Summary
Skill levels in the UK are not meeting the needs of business, nor do they compare favourably with the UK’s international competitors. In numerous surveys employers report shortages of people at intermediate and higher skill levels and also deficiencies in ‘soft skills’ such as problem solving and communication. If the UK continues on its current path firms will find it harder to embrace new technologies and working practices and compete against the rising tide of lower cost competition. Company strategies will increasingly focus on the need for continual innovation, global sourcing and expansion into new markets and these will be impeded by a workforce which lacks the right skills. In addition, UK productivity will continue to lag behind our competitors and we could face the very real risk of losing higher added value activities to lower cost competitors. To address these challenges there is a need to improve technical, practical and IT skills in the workforce; increase the number of people with higher level skills in science and engineering; improve design skills; encourage individuals to equip themselves with decision-making and communication skills and develop management talent. In order to do this individuals will need to take more responsibility for their own learning throughout their working lives and employers must be able to overcome the barriers faced in providing more and better training. In addition, the school system needs to provide individuals with a solid grounding in maths, English and science and training providers need to be responsive to the changing needs of business. Delivery will need to come from a range of education establishments – from schools providing a minimum level of competence and adequate careers guidance to colleges and universities preparing people for entry into the workforce and through to employers maintaining a flexible and adaptable workforce through on and off-the-job training.

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1a Do you consider the current skills profile of the UK to be adequate? Please give details of why/why not. Evidence from a number of sources suggests skills in the UK are not adequate, or are at least seen as making a less positive contribution to the business environment than in other countries. An EEF survey of manufacturing companies in the UK, France and Germany in 2003, showed that the UK was the only country where skills availability had been negative for productivity over the previous 12 months. This was true for every sector in the UK while industries in France and Germany, particularly the latter, suggest skills availability had a positive impact on productivity. The National Institute of Economic and Social Research (NIESR) calculated that skill gaps contribute as much as one-fifth to the productivity gap between the UK and Germany. Other research has confirmed this relationship: better educated workforces are associated with higher productivity and other positive organisational outcomes. Too many people with lower level skills, % of working age population by skill level
100% 80% 60% 40% 20% 0% 1998 2003 UK 1998 2003 France 1998 2003 Germany 1998 2003 US < Level 2 Level 2 Level 3 > Level 3

Source: Steedman, McIntosh and Green The skills set of the UK workforce differs, in some cases considerably, with that of our main competitors. The recent report ‘International Comparisons of Qualifications: Skills Audit Update’ by Steedman, McIntosh and Green showed the UK has a larger proportion of the workforce with only basic skills (sub-level 2) particularly compared with Germany, where some 60% of the workforce holds level 2 and 3 qualifications. While the US also has a relatively small proportion of the workforce educated at this intermediate level, it scores well on higher education with around a third of the workforce holding qualifications above level 3. The relative shortfall in level 2 and 3 qualifications within the UK labour force is illustrated below. Around two-thirds of employers reported deficiencies in intermediate level technical and practical skills among skilled trades and

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operative occupations. In addition, EEF members report a lack of ‘soft skills’, such as communication and team-working at all levels. This is also echoed in the National Employer Skills Survey (NESS) 2003. Skills gaps of this nature can stand in the way of effective implementation of high performance working practices. Lack of proficiency reported across a range of occupations, % of manufacturing respondents
80 % Communication Problem solving Technical/practical Team working

60

40

20

0 Managers Professionals Skilled trades Operatives

Source: National Employer Skills Survey 2003 However, there are also signs that the UK is closing the gap with its competitors in terms of the numbers of people qualified to NVQ levels 2 and 3 and stands ahead of most other countries for qualifications above level 4 thanks to the expansion of higher education. The number of the UK population qualified to level 3 expanded by an annual 3% between 1994 and 2003, compared with 1.8% in the United States and 0.9% in Germany. Furthermore, there are areas where the UK compares well. In EEF’s productivity survey (Catching up with the Continent 2004), higher education was rated positively by employers. In addition, those companies with experience of collaborating with universities were more than satisfied with the level of technical expertise held by academic staff. It seems therefore that the UK does develop graduates skilled in the practical application of science and engineering. 1b What impact does the current skills profile have and what do you consider to be the relative importance of the issues you have identified? The availability of an appropriately skilled and adaptable workforce is one important determinant of a firm’s position in the global market place – both physically (the location of manufacturing functions) and strategically (a firm’s place in the value chain). For companies operating globally the availability of skills in the local labour market will have a direct bearing on the location of manufacturing production.

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EEF’s survey on Competitive Challenges (2004) showed companies view skills availability in the UK as having only a neutral impact on the UK’s overall business environment, with the smallest companies reporting skills availability to be negative for the UK. Companies with experience of operating abroad were more positive about skills availability in offshore locations. North America was seen to provide the best human capital, with firms reporting a very positive experience of the availability of people with the right skills. Eastern Europe (non-EU) came a close second. Other transition economies in Asia were also deemed to provide a positive experience for companies in recruiting people with the right skills. EEF’s Competitive Challenges Survey examined the strategies companies were implementing to remain competitive and meet the challenge of low cost competition. Manufacturers’ dominant strategy to respond to rising competition was to increase focus on innovation, with two-thirds already doing this and a further fifth considering it. Just under half of companies surveyed were developing niche markets and customising their products. The ability to innovate and increase productivity and quality together with having a reliable and high quality supply chain depend on being able to access the optimal mix of skills. We would be concerned if the skill needs of business were not being met in the UK, as this could contribute to a decision to reduce manufacturing capacity in the UK. Secondly, companies facing growing competition need to remain ahead by innovating and moving into the production of higher value-added products (and services). Skills shortcomings can slow the pace of innovation. EEF productivity research (2004) showed the skills of the workforce impact on companies’ ability to innovate. Around a fifth of UK companies interviewed said skills in the UK were a major barrier to innovation. This compared with around 12% citing the same reason in France and Germany. Furthermore, in a more recent EEF survey on Skills (2005), those companies which identified increasing innovation as one of the main business priorities in the next few years, felt an inability to attract talented employees into the business would be the main factor holding back this strategy. Being responsive to customer demands and responding to competitive pressure through new product/process/service design requires a skilled and adaptable workforce. Equally important is the link between skill acquisition and productivity. Having an adequately skilled workforce plays a major role in optimising companies’ productivity growth. In addition to its direct impact on productivity and efficiency, an inadequately skilled workforce can reduce the value and effectiveness of investment in capital equipment – a further driver of productivity growth.

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Finally, companies facing skills gaps or shortages also face more direct effects on their business. The biggest impact from the lack of proficiency among workers in manufacturing is increased operating costs according to the National Employer Skills Survey (NESS) 2003 – particularly among larger manufacturing firms, followed by difficulties in meeting customer demands. The latter will become increasingly important as companies engage more in niche markets and customisation. Smaller companies also report more of an impact on lost orders and losing business to competitors. 2a What do you consider to be the primary drivers changing the skills needed in the UK economy over the next 15 years?
• • • • • • •

Increased competition, especially from lower cost countries Further globalization – managing dispersed workforces and supply chains, managing diverse workforces The increasing sophistication of the production process New technologies/product standards New working practices/corporate organisation. Environmental factors – legislation and consumer tastes driving the need to find new methods of production/new materials Changing sectoral pattern of the UK economy.

A number of these factors are linked. The growth in competition from lower cost countries means companies must increasingly look for new processes to improve efficiency; in addition they must also develop new technologies and products to remain ahead of the competition. However, new technology allows faster communication around the world and companies will become increasingly global – selling, manufacturing and developing goods in different countries and continents to take advantage of new markets and the relative competitive advantages of different locations. EEF’s Competitive Challenges (2004) survey showed that this is already happening and is expected to continue. This trend will drive the need for new working practices, where more team working will be required and in turn decisions will be made on both a global and local basis. Companies become global, % of respondents saying function will move outside the UK within five years.

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100% 80% 60% 40% 20% 0%
D

All

Some

None

bl y

ng

Te st in g

ar ke t in g

Fi na la ss em

M an uf ac tu ri

Source: EEF/NOP World Competitive Challenges survey 2004 2b What do you expect to be the impact of these pressures on the types of skills that will be required? Companies are likely to place increasing focus on innovation as a response to growing competitive challenges. This will require larger numbers of people with higher level skills to carry out and manage research and development. EEF Skills Survey (2005) shows that companies which cite innovation as a business priority in the coming years see a particular need for technical, problem solving and commercial awareness skill to meet this priority. Increasingly developing new products and processes and improving existing ones requires input from a range of scientific disciplines. This can make significant demands on those managing these teams, some of whom will not be in the company’s own workforce, and also on team members who will need to work together effectively. Innovation is also often disruptive and involves risk-taking. This makes demands on individuals and managers in terms of managing and coping with change and assessing and managing risk. In addition, companies are likely to expand R&D processes, by collaborating more with universities and research institutions. Therefore, it is not just the skills of those working directly in manufacturing that will need to be developed in the longer term. EEF’s productivity survey (2003) revealed that companies which have experience of collaboration with universities said the commercial awareness of university staff was inadequate and project management skills only just adequate. As the production process – from development of products to manufacture and follow-up customer service – becomes spread over larger distances more people will be involved with problem solving and finding ways to manufacture (product and process design/planning/managing suppliers) and communication with customers.

S

al es

Q ua lit y

&

M

co nt ro l

R&

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Increasingly, decisions about what is produced, how and where, will be made by those directly responsible for making the product. Those who are closest to the manufacturing process will be the ones who make promises to customers about product features, delivery, and price. A workforce potentially spread over long distances must also be able to communicate effectively at all levels. Even over the short-term companies point to a need for higher management skills and a growing need for soft skills such as commercial awareness, communication and team working – as illustrated below. Firms see skill needs rising in near term, % of respondents citing increased need for skills in next three years, by firm size
100 80 60 40 20 0
M an ag em en t Te ch ni ca l N um er Fo ac re y ig n la ng ua ge w ar en es m un ic a G en er w or k so lv in g al IT tio n in g s

%

1-49

50-199

200+

ic al a

Te a

om

Source: EEF/NOP World Skills Survey 2005 3 If education and training continues on its current course in the UK, are these future requirements for skills likely to be met? Please explain why / why not and give details of the likely economic and social implications. Effect of targets: The efficacy of the current targets for higher education has been called into question by manufacturers. In the longer term, it is beneficial for the economy to aim high as the demand for higher level skills increases in future. However, the concern lies in the risk that young people will be guided in the wrong direction, where a work-based or vocational route to high level skills may be more appropriate. Careers advice and guidance: There needs to be an immediate improvement in the quality of careers advice and guidance given to young people. Currently the information appears to over-emphasise the academic options available, with insufficient attention paid to alternatives based in the workplace. Economic consequences: If future skills needs fail to be met, the UK risks losing higher value added activities to lower cost countries, resulting in weaker economic growth, reduced rates of productivity growth and subsequently, lower disposable incomes. A failure to innovate sufficiently and

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om

m er

Pr

C

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successfully will leave niche producers vulnerable as companies in emerging markets come after them with advantages of lower wages and economies of scale from higher volume production. Social consequences: Further loss of manufacturing activities and jobs is likely to exacerbate the regional imbalances within the UK. On an individual level we could see growing numbers of people retiring on low pensions and/or working much longer, as UK fails to generate sufficient wealth to address its pension crisis. Income equalities are also likely to increase as low skilled people are exposed to increased job insecurity and relatively low wages. 4 What changes in the population’s skills would have the greatest effect on improving the UK’s productivity by 2020? 1. Existing shortfalls in the UK’s skills profile, as identified by the Sector Skills Councils, need to be addressed, including improvements in technical and practical, IT and management skills. 2. An increase in the proportion of people with higher level skills in science and engineering is needed to support innovation together with an improvement in applying practical skills in a commercial environment. 3. There is also a need for management to aim high and develop effective solutions and strategies for their business that will then demand higher skills and lead to productivity gains. Improving longerterm thinking and strategic planning is also central to the future strength of manufacturing. 4. There is a growing need for the development of soft skills – among graduates and the workforce generally. Employees need to be confident in decision making, team working and problem solving and be adaptable to changing working patterns. They also need to be able to communicate with customers across different markets – multicultural awareness. 5. There should be an increasing focus on design skills, including management understanding of how design can add value to business. Government has raised expenditure on science and introduced a number of measures, including the R&D tax credit, to stimulate more innovation in business. Design is the missing part of the jigsaw and would benefit from government attention. 6. Greater independence – employees need to be engaged with and responsible for their own continuing education and learning. 7. Financial literacy is an essential skill. There should be greater efforts to improve financial awareness to allow employees to take greater responsibility for their own pensions, for example, thus reducing the dependence on employer arrangements. 5 Is it necessary and possible to stimulate demand from individuals for improving their own skills? Please give details. There is an increasing need for individuals to engage fully in their own learning, and to take responsibility for their own employability. There is also a

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need, to be supported by employers and the government, to change the perception of employees that training should be free to the individual. As an individual looks to training to improve their earnings potential, they should also see the future benefits of security, employability, and even financial independence at an earlier age. Stimulate demand and encourage take-up by: • Increasing and improving local delivery. • Providing anonymous participation, especially at basic skills level – webbased access can provide this level of security while still being effective as a learning tool. • Creating an environment of learning in the workplace and the home. • Providing clear information on earnings and financial benefits from increasing skills. 6 Is it necessary and possible to stimulate demand from employers for skill improvements in their country / their workforce? Please give details. It will be important to first address fundamental issues such as the quality of school leavers and graduates entering the workforce before continuing learning at work can generate maximum benefits. Employers need a workforce with good foundations which can then be built upon through continuing training. A stable economic environment is also required to support overall business planning and any subsequent employee training. Uncertainty, a growing burden of regulation and compliance and rising costs (either from taxation or input costs) will all have some negative impact on companies’ ability and willingness to invest in skills and training. Employers’ investment in skills will also be driven by their overall strategies. For example, if the business environment in the UK supports and encourages high levels of innovation and capital investment, this will stimulate further investment in skills. In addition, more successful innovative businesses are more likely to have the funds and the confidence to invest in skills. There is also a role for providing vehicles, such as the Investors in People standard, which link training plans with business strategy. EEF’s Skills Survey (2005) showed that companies with IiP accreditation are more likely to have dedicated training budgets and link their training more to their business plan rather than available funding. In addition, firms with the IiP standard are more likely to assess training outcomes. While our survey did not point to higher training expenditure among firms with IiP, it did seem to lead to more effective training spend. If the economic environment is right, the key issue is then to overcome barriers to training firms face – especially small firms. The NESS 2003 survey shows employers (both manufacturing and non-manufacturing) see further

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training as the action needed to be taken to eliminate skills gaps in the workforce, but companies face barriers to doing so. EEF’s skills survey (the result of which are illustrated below) show that over 60% of firms report a lack of funding as being a barrier to the provision of more or better training and for almost two-fifths of companies this is the most significant constraint. Funding limitations are more acute for the smallest employers (with fewer than 50 employees). Granting employees’ time off for training and a lack of suitable courses were also considered to be barriers to further training by around a third of respondents. Other constraints, particularly on smaller firms, come from a lack of information about suitable courses and training providers. Barriers need to be overcome, % of respondents citing each as barrier to providing more/better training
1-49 Lack of funding Time off for training Lack of courses Lack of provider information Staff reluctance Lack of appropriate accreditation Lack of course information 0 10 20 30 40 50 60
%

50-199

200+

70

Source: EEF/NOP World Skills Survey 2005 Stimulate demand by: • Providing a stable economic environment in which business can plan and invest in skills. • Supplying business with good quality school-leavers and graduates that will make maximum benefit of in-work training. • Assist companies with overcoming the constraints they face in providing more and better training. 7a How do you think that the UK’s future skill needs can be best met? In particular, through the skills provided by (i) schools; (ii) colleges; (iii) universities; (iv) training providers; and (v) employers? (i) Schools Before people enter the workforce the school system must equip them with a minimum level of competence in the fundamental skills necessary for progression and participation in society. These include literacy, numeracy and use of ICT, and will provide the foundations for all other learning. Furthermore, getting these fundamentals right is particularly 168

important if more people are to be encouraged to study science, technical, engineering and maths (STEM) at a post-compulsory level. An OFSTED/ALI report (April 2003) identifies weakness in mathematics as a major contributor to poor pass rates in engineering qualifications. In addition to academic responsibilities, schools also have a role in developing ‘soft skills’ such as communication, team-working and problem solving skills. It is vital that these are developed before entry into the workforce. Provision of unbiased careers advice and guidance is also a function schools should perform. For companies in manufacturing to attract talent into the industry in future, young people must be provided with comprehensive information about career options and the routes that can be followed after compulsory education to achieve career goals. The school curriculum also needs to be responsive to the challenges of modern society. For example, we suggest there is a need for schools to foster an understanding of financial planning among young people. Increasingly, it will become necessary for employees to take responsibility for their own pension arrangements. We see it as necessary to start this process early if people are to become competent in making decisions about financial arrangements. (ii) Colleges Existing policies and proposals means the role of colleges in the provision of education and training to those under 16 years is likely to grow. If this aim is to be successful it is important that colleges can provide adequate equipment for teaching purposes and satisfactory levels of training provision. At present, many colleges appear to suffer from underinvestment in the resources necessary to good provision of engineering, manufacturing and technology learning. The OFSTED/ALI report (April 2003) said of engineering education in colleges; “..there is too much out of date equipment and sometimes it is not easily accessible .” This suggests that there must be additional investment in college infrastructure if they are to play a role in the delivery of 14-19 years education and beyond. There is also a need for better engagement with employers and for colleges to be more responsive in the design and delivery of courses. This is highlighted in the OFSTED Curriculum Area Report (2002/03) – Engineering, Manufacturing and Technology. There were particular concerns about work based learning and poorly developed links between the requirements of NVQs and the needs of the workplace. Again, improving this relationship is critical. (iii) Universities This response has already discussed the importance of continual innovation and product and process improvement if UK manufacturing is

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to compete in an increasingly challenging global environment. For companies to rise to these challenges they need the right people to carry out research and development and these people will most often be delivered through the higher education system. For manufacturing, future skill needs will need to be addressed through an increase in the numbers participating in higher level science and engineering education. EEF survey evidence suggests that the practical/theoretical knowledge gained during a science or engineering degree is more than sufficient. There is, however, a need for more people with these skills, and for the academic knowledge to be supported by a better understanding of the commercial environment. The first point in some ways relates to the issue of career guidance which has already been touched upon. The latter issue involves enhancing the curricula to include “soft” skills development, which employers feel is often lacking in new entrants in to the labour market. Fostering links between business and higher education could increase opportunities for work experience. To encourage greater numbers of people into science and engineering degrees, universities may need to look at more flexible provision. For example, by developing part-time and on-line programmes, universities could ensure that the growing numbers of people who do not wish to or an unable to undertake a full-time qualification can still gain the necessary skills. (iv) Training providers Group Training Associations (GTAs) can play a key role in helping companies, particularly small firms, maximise the effectiveness of their training expenditure by providing tailored training and support for employers. They are particularly valued by small firms, who rely on GTAs to manage their apprenticeship schemes. The contribution of training providers such as GTAs in meeting the emerging skills needs of the engineering and manufacturing sector will rely on an improvement in the current funding and political landscape. GTAs and private training providers sometimes struggle for their place in Further Education (FE) in competition with government funded colleges, and there is a need for a more level playing field. However, employer support for GTAs and training providers over college provision has been demonstrated by the recent Employer Training Pilots, where large amounts of training have been delivered outside the college sector, in direct response to employers’ articulated needs. A responsive, employer-led service offered by GTAs and training providers could contribute to a model for future employer engagement. (v) Employers

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There are a number of ways in which business can contribute to the future development of skills in the UK, but this should not include responsibility for basic skills which should be covered by schools. There is a role for the provision of training and development to maintain and improve skills in the existing workforce and provide key workplace competences. In addition, companies could foster links with schools, colleges and universities to promote a better understanding of business and working in a commercial environment in young people. This could extend, where practicable, to participation in work experience programmes, as this can be a valuable way of improving the ‘soft’ skills of employees that businesses feel is often lacking among entrants into the workplace. Finally, employers need to provide an attractive working environment to work in and provide employees with the opportunity for career progression. 8 What are the three things that you think would have the greatest effect on the UK’s ability to provide the skills required to benefit society and the economy in 2020? Please give details and reasons for prioritising the issues identified. EEF see future skills development in the UK as being the joint responsibility of government, employers and individuals. There are three pillars which will support the improvement of skills in the UK over the longer term. The first is improving the quality of school leavers through driving up educational standards, particularly in English, maths and science. Secondly, by helping employers overcome barriers to engaging with life-long learning and thirdly by encouraging greater involvement and acceptance of personal responsibility of individuals. a) Improving education standards It is the responsibility of the school system to build the foundations of a productive workforce by providing a good grounding in numeracy, literacy and science. As noted in Q1, there are too many people in the UK with only basic skills, particularly when compared to other developed countries. Business would maintain that they should have, at most, only a limited role in improving basic skills in the workplace. There is evidence to suggest that the situation is improving as test scores in maths and English have been increasing. However, there are still too many young people leaving compulsory education without a firm grasp of core subjects. b) Overcoming constraints on employers EEF’s Skills Survey 2005 explored what policies would help business overcome the barriers to training they face. The key results are shown below.

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Tax incentives and reduction in bureaucracy would have biggest impact on employer training, impact on employer training provision 1=significant negative, 5=significant positive
Tax credit for training Less bureaucracy More apprenticeship funding Funding following learners Better local/reg guidance Provider/employer coordination Better course information Better provider information Training levy

1

2

3

4

5

Source: EEF/NOP World Skills Survey 2005 It will be important for Government to address the traditional limitations on business expenditure on training and development. Our survey showed that tackling funding shortfalls, either through the tax system or more direct funding to modern apprenticeships, and reducing the level of bureaucracy, would have a positive impact on companies’ investment in skills. In conjunction with this, business also needs to see the market for training operating better. Many of the factors that business feels would have a positive impact on their training performance relate to how training provision is structured. For example, there appear to be gaps in the provision of information on course availability and provider quality. Our survey indicates that better coordination between business and education providers and also improved communication and guidance from local and regional agencies would make a positive difference. The proposed extension of the skills brokerage service as part of the National Employer Training Programme may address some of these issues. c) Individual involvement As mentioned in Q5, individuals also have a responsibility for their own career development and continuous learning. This should, in the first instance, be supported by effective careers advice and guidance, and secondly, by a willingness to engage in lifelong learning. EEF’s skills survey showed that companies sometimes come across reluctance among staff to engage in training. This can hold back companies from generating productivity improvements through new working practices or processes if employees are unwilling to learn new skills. Furthermore, it can undermine individuals’ aspirations for career development and the consequent financial gains.

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At stated in Q5, it will be necessary to encourage individual participation in life-long learning and create an environment for learning at home and at work. One option could be to follow up on the initial success of the Individual Learning Account scheme, which, despite flaws in the national roll-out, did give individuals a relatively straightforward way to improve skills.

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Contact details of respondent Name Job Title Organisation Postal address Dr Anil Kumar Director, Education and Policy The Engineering and Technology Board (etb) 10 Maltravers Street, London WC2R 3ER Telephone number Email address 020 7557 6433 akumar@etechb.co.uk

Questions 1a

Response Y/N Y

Accompanying documents Developing Technicians in the Workforce Phase 1 (click here to download the summary or full report) Developing Technicians in the Workforce Phase 2 (click here to download the summary or full report

1b 2a

Y Y Digest of Engineering Statistics 2004 Click here to download the full report: Digest of Engineering Statistics 2004 Skills for Manufacturing SMEs Click here to download the summary or the full report

2b 3 4

Y Y Y

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5

Y

‘The economic benefits of higher education qualification’, RSC and IoP, January 2005 (reference only) McIntosh, Steven. 'Further Analysis of the Returns to Academic and Vocational Qualifications.' DfES Research Report. 370 (2002). (reference only)

6 7a 7b 8 9 10 11

Y Y Y Y N Y Y

Type of Organisation

Business/ Employer representative

Response CAN be posted on Leitch Review website ______________________________________________________________ __

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LEITCH REVIEW OF SKILLS ~ CALL FOR EVIDENCE
Response from The Engineering and Technology Board (etb) The Engineering and Technology Board (etb) is a registered charity that aims to tackle the significant yet unaddressed needs of the UK's science, engineering and technology industry and to create a unified platform and voice. We work in partnership with business and industry, Government, education and the profession to improve the perception of science, engineering and technology (SET) in the UK. The driving force behind this partnership is the desire to ensure a supply of appropriately skilled individuals to meet the present and future SET skills needs of UK plc. With more than 30 engineering institutions in the UK alone and equal numbers of science bodies; the etb aims to act as the voice for the sector. Our vision is "to promote the vital contribution that scientists, engineers and technologists make to prosperity and quality of life" Consequently our response is unashamedly focussed upon the supply of well trained STEM (science, technology, engineering and mathematics) centred individuals for the UK SET (science, engineering and technology) industrial base. Indeed, our own commissioned research, which quantifies the contribution of science, engineering and technology (SET) to the UK economy, indicates that SET-intensive sectors produced £252.3 billion, 27.3% of the total UK value added in 2002 and that the high SET-intensive sectors contributed 27.1% of the improvement in labour productivity over 1993 to 2000: science and technology are key drivers of productivity. There are around 2.5 million people in SET occupations in the UK, both within the SET intensive sectors and elsewhere, including services. Their skills are fundamental to our economy’s success, yet within the SET sector, women represent a significantly under-utilised resource. Appropriate skills at the technician level are also scarce.

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No. There are definite large scale skills shortages for the SET sectors at level 3 (technicians), level 4 (higher technicians) and level 4/5 (graduates), particularly with respect to work related skills and ‘management’ skills.

The current skills shortages will only serve to undermine the long term science, engineering and technology base of the UK.

It has been recognised by many sources, including within the recent science 10 year framework and various DTI innovation reports that the UK science, engineering and technology base is shifting from a low skills/ mass production to a high skills/ valued added goods and services economy. Consequently, there is an urgent requirement for increasing the supply of highly skilled STEM based individuals into the economy; including the supply of STEM doctorate and post-doctorate students to support the University and Industry R&D base. We only have to raise our eyes above the horizon to China and India to recognise that the global competition and technological changes are already driving skills agendas.

Within the SET sector there already is a need, based upon the trends for higher added value goods and services v’s mass production, for more than the a minimum level of skills i.e. level 2 numeracy, literacy and ICT. The Government should recognise that their aspirations for basic skills entitlement is already set too low and should move rapidly towards implementing funding streams that will allow, particularly within the STEM environment, skills entitlement at level 3. 177

Whilst the Government who do ostensibly set the education and training agenda, has via it’s various guises (HMT, DfES and DTI/ OST) recognised many of the underlying SET based trends and issues; we feel that the future skills requirements are not likely to be met – not in the time frame that is required anyway. The future direction is “too little” (funding streams that will make a difference i.e. at level 3) and “too slow” (time scales for wide scale change is not challenging or urgent).

What is required is a complete one level step change in the population’s skills, there is not point in tinkering with parts of the system, everyone needs to be stretched and challenged and aspirations should be set as soon as possible at level 3 being the minimum level requirement if the UK is to stand any chance of having a productive and vibrant economy in 2020.

Before we can look to answer the set question, we need to understand the more fundamental question which is “WHY is it necessary to stimulate demand from an individual to improve their own skills?”. It is only through understanding why are we able to suggest how. We have shown that the SET-intensive sectors produced £252.3 billion, 27.3% of the total UK value added in 2002 and that the high SET-intensive sectors contributed 27.1% of the improvement in labour productivity over 1993 to 2000. Therefore from an employers view point one can clearly see the benefits of having a skilled work force. However, our own experience and research within CPD (continuous professional development) and promoting professional qualifications (i.e. CEng, IEng and EngTech), has shown that the most successful incentives or interventions to encourage an individual to improve their skills are those which are ‘employer driven’ and result in a tangible benefit for the individual i.e. increased wages, promotion, time off for training, resulting qualification. 178

If we are looking for individuals to take at the very least a shared responsibility for improving their skills, then we need to look at a cultural change which has to start as soon as one goes into formal education, the concept of life long leaning needs to be firmly embedded into their psyche and hand in hand with that needs to come real life, contextual examples of why life long learning is important within the world of work. Alongside this is it is critical that individuals who engage in learning are exposed to the benefits of improving their skills; for example a recent report produced jointly by the RSC and IoP entitled ‘The economic benefits of higher education qualification’ unequivocally showed that over their working lives SET graduates will earn around £187,000 more than those with two or more A-Levels but no degree, whereas history and English graduates earn £89,000 - £92,000 more. Indeed, out of all the subjects reviewed, engineering came towards the top of the table - their lifetime earnings were outstripped only by those in law and medicine. Simialilry, McIntosh has shown in his 2002 report ‘Further Analysis of the Returns to Academic and Vocational Qualifications’ that with respect to vocational qualifications, men and women earn positive returns to HNC/HND and ONC/OND qualifications, although these are slightly higher for men (14% and 11% respectively) than for women (8% for each). We would suggest that as part of the findings of this review would be to produce (probably through an analysis of existing research) a promotional message that clearly shows the economic benefit that can be accurred by an individual through learning/ upskilling etc

Our experience and networks indicate that the primary driver for more skilled workforce is economic performance and long term sustainability. However, the ability of an employer to actually realise their skills aspirations tends to be almost directly proportional to their economic size i.e. SMEs on the whole find it more difficult for a whole variety of well recognised reasons compared to large multi nationals. Our view is that some limited demand could be stimulated by improvements in information and employer representation groups; providing the information is quantitative based evidence that provides a robust ‘business case’ for those companies who need to be convinced as to the real economic benefits of skills improvement and investment.

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A bigger impact in the desired objective could be realised by the introduction of an attractive Training and Development Tax Credit for organisations particularly the SMEs.

The most powerful single intervention that could be introduced in order to ensure that the UK’s future skill needs can best be met is for government to provide coherent continuity across publicly funded ‘education and skills’ by removing the unhelpful intra-departmental barriers, to be blunt there are far too many cooks. Employers, individuals and in this case most significantly, educational establishments need to unambiguous as to their responsibilities within the skills agenda, they need to be absolutely clear as to the flow of their funding streams which in turn need to be coherent and not split across various national and regional government agencies (and if they are it should appear to the user that they aren’t). In particular the transfer between the interfaces between school and college and higher education via vocational and academic pathways has to be seamless, currently it isn’t and there are too many funding anomalies. Such as system would allow employers to be able to make strategic decisions as to the balance of in-house to external skills provision. Finally, if there could be a simple, easily administered, cost effective process for employers to have their own in-house training and development accredited towards recognised national qualifications and/ or professional qualifications, our view is that many employers would wish to pursue this avenue.

Most definitely yes. The needs of the labour market, drives the economy, which in turn is driven by the workforce who are trained by various education and training providers. The key issue here is that the labour market needs to be able to articulate it’s needs quantitatively and qualitatively, the Skills for Business network, in

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theory, should be addressing this issue and we await the outcomes of the Sector Skills Agreements.

1.

Joined up Government funding streams (also see 7a) – public funding is and will remain the key underpinning driver for the economic success of the UK. ‘Education’ having the tools to be able to deliver on the skills agenda i.e. Well equipped and up-to-date laboratories, high quality trained teachers and lecturers, modern and relevant curriculum content and materials, attractive salary and careers structure for teaching professionals and a robust CPD (continuous professional development) framework. Societal understanding and appreciation of the value of skills to individuals, organisations and to the social and economic development of the UK.

2.

3.

None of note.

We would like the review to add real value to the issue of education and skills by pulling together into one seamless and coherent UK review/ database/ skills map all of the myriad of surveys, research reports etc that have been produced by the main protagonists within this arena i.e. SSCs, LSCs, RDAs, HMT, DfES, DTI, OST, HEFCE, SSDA, LSDA, etc to name but a few.

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What is missing has been a single review/ report that everyone can agree/ subscribe to and work from!

The review is looking at 2020, rather than just providing a very long list of recommendations that may ultimately be distributed to a whole host of separate establishments to deliver; we would suggest that part of the reviews output should be to present a radical apolitical framework that would deliver a seamless funding stream for education and skills that spans the whole continuum from early years to post graduate education including adult education. The framework should be one that would cater for both academic and vocational learning within a structure that once and for all abolishes the historical and current dependence on disparate academic and vocational pathways.

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All extracts that are relevant to Norman Lamb’s FOI request from Minutes of the People Management Board Skills Shortages A lengthy discussion took place on the issue of skills shortages, which are having a damaging effect on business for a number of member companies. A brief paper will be presented to the next SBAC Council meeting, reflecting the PMB’s views. In essence, the PMB looks at issues in the medium-to-long term and has never had any kind of mandate from the industry to take shortterm, executive action. The budget cycle is too short a view to take in an industry where it can take 5-7 years to train a professional engineer. The most effective short-term solution available to aerospace companies, is to break down internal barriers to more flexible working, enabling e.g. technicians to take on professional engineering functions. It was pointed out that these categories are no-where defined in a way that would inhibit this happening, other than within companies themselves. Some companies have succeeded in recruiting engineers from Eastern Europe, however short-term recruitment solutions tend to be very expensive. It has been reported that in the UK, 1 in 6 graduates are looking for jobs abroad. Rosalind Azouzi said that she regularly sees young people with engineering – even aeronautical engineering – qualifications, who have been unable to get work in aerospace companies. There is typically no aerospace presence at graduate recruitment fairs. Perceptions of engineering in the market place are not good. The fourth leg of the SSA focuses on better manpower planning and recruitment practices – these deficiencies are not exclusive to aerospace.

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FREEDOM OF INFORMATION REQUEST ON SKILLS FROM NORMAN LAMB LIB DEM SHADOW TRADE & INDUSTRY SECRETARY
1. EXTRACTS FROM THE MINUTES OF THE 9 NOVEMBER 2005 PLENARY MEETING OF THE SHIPBUILDING AND MARINE INDUSTRIES FORUM CONCERNING SKILLS GAPS IN THE SECTOR Chairman’s introduction and Minister’s opening remarks [The Minister recognised that] The marine sector’s skills base is key to its future success. The Minister was much encouraged by the close links that he saw in Poole between the Marine Skills Centre and Sunseeker as well as other marine companies. At the same time it was important to ensure strong links with the further and higher education establishment. Skills Availability: Implementation Plan for the Marine Sector Skills Agreement – Presentation by SEMTA SEMTA was continuing to develop a Marine Sector Skills Agreement (SSA), now expected to be completed in early 2006. The Marine Sector Strategy Group, which had been established to take forward both the Agreement and the costed Action Plan, had identified the following key strategic skills issues: management and leadership; productivity and competitiveness; technical workforce development; manpower planning and recruitment. During the following discussion it was generally felt that the quality of the training providers would be crucial to the successful implementation of the Plan, as well as how companies are engaged in the process both for their own needs and for their supply chains. Discussion turned to the comment made earlier by the Minister about the need to avoid any disconnect between the various skills and training initiatives underway and the further and higher education establishment. SEMTA acknowledged that this was an issue which needed to be addressed as part of the arrangements for securing effective implementation of the Marine Sector Skills Agreement. The Chamber of Shipping said that somewhat similar problems had arisen in the sea-going sector and it might be worthwhile looking into the approach adopted by Universities in that context. 2. EXTRACTS FROM THE MINUTES OF THE 23rd TO THE 26th MEETINGS OF THE SHIPBUILDING AND MARINE INDUSTRIES FORUM “CORE” (STEERING) GROUP CONCERNING SKILLS GAPS IN THE SECTOR 23rd Meeting, 3 August 2005 SEMTA said that as part of the process for establishing the Marine Sector Skills Agreement a draft Employer Action Plan was about to be sent out for consultation and reply by end September. The costed Marine Action Plan, 184

specifying the respective contributions sought from employers and funding agencies, would be drawn up in the light of the Action Plan. The Chairman asked SEMTA to ensure that the Forum is kept closely informed of developments so that they can input to the process as necessary. It was agreed that this topic should be given major billing at the Forum plenary in November. During discussion reference was made to an initiative by BMT to ensure that the question of availability of the intellectual and higher-level management skills for the sector was being appropriately addressed. DTI Marine had suggested to BMT that it would be sensible to discuss this initiative with the Chairman so that the Forum could support the initiative and at the same time could seek to avoid any unnecessary duplication. 24th Meeting, 30 September 2005 SEMTA reported that the Draft for Consultation, which covers stages 1 to 3 of the Martine Sector Skills Agreement, has been circulated across the UK to delivery partners who had been asked to respond by the end of October. It is envisaged that the Action Plan will be published by December. The Agreement will initially focus on management and leadership issues. SEMTA are discussing funding mechanisms with employers. The Agreement will also address productivity and competitiveness; technical workforce development; and manpower planning and recruitment. SEMTA had also established a small working group of the Marine Sector Strategy Group to share best practice with other manufacturing sectors (e.g. automotive, electronics), which had identified similar skills issues as marine. The Chairman welcomed these developments. The Agreement would be an important first step towards improving the availability of skills within the sector. The Chairman had some concerns about the extent to which SEMTA are engaging SMEs in the process. SEMTA replied that over the coming year SEMTA will be engaging some 950 SMEs nationwide through a ‘brokerage product’ they had recently developed. SEMTA invited proposals on the marine companies that the Group would like to see engaged. There was also discussion about how SMEs could be persuaded to put their own money into training. The British Marine Federation suggested that a model was in place in the SW in the form of the three Skills Centres that are being established. DTI Marine mentioned a proposal, which had originated at the Manufacturing Forum, to establish a National Skills Academy for the Manufacturing Sector to serve as a focus for the development and delivery of training provision. SEMTA had submitted an Expression of Interest (EOI) on behalf of the marine sector to the consultants undertaking the scoping study. BMF had written to SEMTA in support of their EOI. SSA and the CSEU had also written in support. It was agreed that SEMTA should give a presentation on developments and implementation plans for the Marine SSA at the Forum plenary, subject to it being pre-viewed at the next meeting of the Core Group. 185

25th Meeting, 31 October 2005 The Group considered a draft agenda for the plenary and pre-viewed SEMTA’s proposed presentation on the Marine SSA. Following discussion the agenda was agreed, subject to the SEMTA presentation being refocused on how the Marine SSA will be implemented, with less emphasis on progress to date. The Chairman saw the Forum plenary as a golden opportunity to raise the profile of the skills agenda for the sector amongst employers on the way forward on the skills agenda for the sector, and to stimulate discussion, at a crucial stage of the SSA process. SEMTA agreed to provide the Secretariat [provided by DTI Marine] with the slides for a suitably revised presentation by close the following day. 26th Meeting, 17 January 2006 SEMTA said that the Marine Sector Skills Agreement was now expected to be completed around Easter. It was agreed that this should be a major item at the next Forum plenary, with clear plans for implementation including effective use of the £0.5m grant made available by the Treasury.

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-----Original Message----From: Bourne Roger (Mr RP) Sent: 17 November 2005 16:21 To: 'christine.west@ssda.org.uk' Cc: Rolfe Shirley (Ms SA) BR1; 'rhiannon.chapman@sbac.co.uk' Subject: TRIM:TRIM:AEROSPACE - THE SKILLS AND PEOPLE AGENDA Importance: High

Christine cc Rhiannon, Shirley 1. It was good to see you yesterday and to hear about your secondment to SSDA from the Small Business Service and your work to support the development of the SSC's potential to address cross-cutting skills needs. 2. I promised to send some background on what's happening on the skills and people agenda in aerospace. 3. Our agenda - which grew out of the Aerospace Innovation & Growth Team work - is being driven by the Society of British Aerospace Companies (SBAC) People Management Board (PMB), which is made up of stakeholders mainly from within the industry but includes, for example, representation from SEMTA (Lynn Tomkins, UK Director of Operations) and education/training providers such as the Association of Aerospace Universities. The PMB is Chaired by John Rivers (Rolls-Royce Director of HR). The work programmne comes under the leadership of Rhiannon Chapman of the SBAC (who brings a wealth of experience from earlier appointments as Chief Executive of the Industrial Society, and a portfolio of non-executive directorships and public appointments, as well as conference work, executive coaching and writing). 4. Key areas of activity underway are:

The Skills Delivery Programme - ensuring that the Sector Skills Agreement delivers practical solutions and benefits to the sector - establishing links between stakeholder skills development & training - where necessary, creating new structures, networks and information streams - getting the skills message across - importance of skills and training in achieving High Performance Work Organisations; inter-linkages with process excellence agenda; influencing regional aerospace partners/associations in setting up Skills & Training groups. (We are working closely with the Society of Motor Manufacturers & Traders Industry Forum and the EEF who sit on the SBAC PMB's newly formed Training Directors Committee, so we are already thinking of potential for cross-cutting activity) - running skills and training awareness workshops and events - engaging better with education and training providers - how to address skills shortages: improving manpower planning and recruitment practices; retention issues; breaking down barriers to flexible working.

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A briefing note setting out what we are doing; why we are doing it; what needs to happen etc is attached, together with a short slide show on the Skills Delivery Programme. Careers in Aerospace initiative - promotion of careers in aerospace events - development of website - Schools activities (7-14 age group): consideration of sector wide promotion building on success of BAE Systems' award winning 'Cragrats' roadshow - Redeployment and reskilling: Midlands Engineering Industries Redeployment Group initiative Manufacturing Skills Academy (MSA) - SBAC is working closely with SEMTA's MSA bid, building on our Skills Delivery Programme. The MSA was one of the first four National National Skills Academies (along with construction; food and drink; and financial services) just announced by Ruth Kelly and Alan Johnson to benefit from a share of up to £40 million of investment from both the Government and industry. People Management Board Manifesto - Work programme is being developed for 2006, which could include; - diversity: aerospace is the least diverse of the four advanced engineering sub-sectors and employs the fewest young people, women or ethnic minorities; how does this impact on competitiveness; how can we change?

- single status/harmonisation: distinction between blue and white collar workers may be unsustainable if we are to succeed in adopting new manufacturing practices throughout the industry; possible review of companies where such distinctions do not exist.

- knowledge development and transfer: how can companies best share learning and best practice; Skills Transfer pilot scheme being set up by Aerospace Sector Skills Group (under SEMTA) to test means by which the demand led skills agenda is to be delivered in partnership with leading providers in three regions.

- working with SBAC Enterprise Excellence Board to develop 'people as a supply chain' concept 188

6. Also attached is the People Management Board's recent report to the Aerospace Innovation & Growth Leadership Council, chaired jointly by Alun Michael (Minister for Industry and the Regions) and Mike Turner (CEO of BAE Systems), which is the lead body for sector engagement between the aerospace sector and government. It is responsible for continued implementation of the Aerospace Innovation & Growth (AeIGT) agenda, but will also tackle emerging issues of strategic importance to both the aerospace industry and the Government. The paper reiterates many of the points covered above but gives a strategic overview of key objectives; work in progress; achievements; and future challenges. 7. I hope all this will give you a useful flavour of the aerospace skills agenda. The AeIGT did much good work, particularly on things such as examining future skills requirements, which fed into the Sector Skills Agreement. The SBAC PMB taken this on further. As you will have gathered from the above, we have been particularly busy building networks - not only to ensure that we can influence other key stakeholders to address the particular needs of aerospace, but also to ensure that we avoid duplication and avoid going down the wrong paths. 8. I leave you to consider whether SSDA wants to develop direct links with the SBAC PMB, or whether you are content for SEMTA to report up to you on what is going on, as necessary. As I mentioned to you yesterday, following a senior level meeting in June between DTI and SSDA (represented by Christopher Duff, Mike Campbell, Geoff Fieldsend, and Kieron Gavan) the SBAC did make contact (I think with Kieron) with an offer to brief them about our work, although I understand that this has not been taken up. Perhaps SSDA's focus on its reorganisation got in the way at the time. You may wish to take the opportunity to let your colleagues know that the offer remains on the table. 9. Please let me know if you want to know more about our skills agenda. In return, please contact us if there are anything coming out of SSDA that you think we should know. Finally, please feel free to drop by whenever you are in the area. Best wishes Roger Bourne Deputy Director/Aerospace Marine & Defence Bay 348 151 Buckingham Palace Road London SW1W 9SS Tel: 020 7215 1128 Fax: 020 7215 1304

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All extracts that are relevant to Norman Lamb’s FOI request from SBAC Briefing Note for Communications on the Skills Delivery Programme Why we are doing it: • The industry is facing a massive re- and up-skilling challenge to meet the demands of: o increasingly higher proportion of R&D in the industry ‘mix’ o new technologies and updated working practices o an aging, traditional workforce who need to be encouraged to ‘buy into’ training o making the industry more attractive to young people, women and ethnic minorities, whom we need to balance out the demographic deficit • This is the single most important way that SBAC’s People Management Board can support the industry and add some real value over the course of the next 35 years (after which, it is probably too late!) As it happens, we already have a commitment to the DTI to deliver, as lead partner, the High Performance Work Organisation contract, under which it has been agreed that this Skills Delivery programme falls. (The DTI have agreed an extension of the contract to end of June 2006 to enable us to achieve key deliverables under this programme. The HPWO contract is a ‘partnership’ contract, in which we are committed to work in close collaboration with AMICUS. As it happens, this suits our purposes extremely well as there is a close match between what we need to achieve and AMICUS’ own industry agenda. They also have useful resources to bring to bear on it.) • The timing is also right because of the publication (March 05) of SEMTA’s Sector Skills Agreement, which needs to be turned into some kind of reality within the industry. So we have a very useful ally in SEMTA, who have already offered me some admin support – one day a week – to help build and track the network and its activities as they get developed.

•

What we need to have happen • For training people at all levels from within member companies, to make themselves known to us and to get involved in the activities we will be generating. (This includes training deliverers, both internal and external to companies, but also the people who identify training needs and contract training within aerospace companies.)

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•

We also need to know who the ‘excellent’ providers are currently seen to be, so we can get them drawn into the framework also. This means companies must tell us whom they currently use for training and what they think of them. We want to be in a strong position to contribute to the development of more relevant qualifications – and better-delivered learning and training across the piece. We need good training ‘stories’ and case studies that we can publicise and platform at events. We need to get the best providers to partner with us in developing all this. We want to be able to attract public funding at national, local and company level, to support this programme of work going forward.

•

• • •

The bottom line is: It is crucial that the industry does more and better training for its entire workforce. It is currently not well-supported in doing this, nationally or regionally, because the building blocks that do exist are not linked up and because there are important gaps. There is never a good time to train – at the bottom of the business cycle, you can’t afford it and at the top, you can’t spare the time. Training does require taking a longer-term view - or at least medium-term - which most managements are not at all good at. The companies themselves have to be convinced that it is in their interests to do more and better training. It could well be that a lot of what they are doing now is wasted, because they do not have access to information and expertise to help them make better choices. So it might not even cost them more! In any event, we expect to be able to channel more funding through to companies to help them with training costs. It is difficult (if not impossible) for the providers of training to become more relevant and effective, if we, the industry, are not telling them clearly and specifically, what we want (what Ged Leahy calls ‘the demand signal’). At the moment, this is very weak and, from the smaller companies, virtually nonexistent. It will only improve if we can get the industry more focussed on their skills needs and the relevant training support. Other people can make other parts of the jig-saw work – only we can develop the company engagement that is required.

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All extracts that are relevant to Norman Lamb’s FOI request from email to Ged Leahy and Rhiannon Chapman
-----Original Message----From: Bourne Roger (Mr RP) Sent: 06 February 2006 12:14 To: 'Leahy, Ged'; 'Rhiannon.chapman@sbac.co.uk' Cc: Scott Malcolm (Mr MJ) BR1; 'Rivers, John R' Subject: RE: SKILLS Importance: High

Ged, Rhiannon 1. Thank you for both the timeliness of the reply and setting out your thoughts so clearly. Thanks also for the detailed and informative SEMTA, EEF and ETB responses to Leitch. 2. I will ensure that these points are fed into the policy thinking here.

3. Please keep me informed of any change in thinking, emerging points of concern, and on the relationship with SEMTA etc. And, of course, any examples of good practice or smart thinking that you may come across and which could usefully be brought to the attention of people here. 4. Picking up your point "...there is a concurrent need for Govt and publicly funded institutions to be seen to be more responsive, rather than just talking about it, or we run the risk of switching off the renewed interest that has been generated", it is important that you bring to our attention specific examples as and when they arise. I note from the responses of the Leitch review that current key issues for Government are seen to include:
•

In order to stimulate demand from employers for skills improvement, industry would like Government to ensure a "seamless" UK public funding regime in place to support Level 1 to 5 qualifications in order to encourage more consistent employer engagement.

•

To assist productivity, there should be an increasing focus on design skills (including management understanding of how design can add value to business. Although Government has raised expenditure on science and introduced a number of measures, including the R&D tax credit, to stimulate more innovation in business, design is the missing part of the jigsaw and would benefit from government attention.

•

Government should ensure that organisations accessing Government/Agency-funded programmes should receive support on condition that the funding will be used used to provide education and

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training not only for the current needs of the labour market, but for future needs too.

•

Within the SET sector there already is a need, based upon the trends for higher added value goods and services v's mass production, for more than the a minimum level of skills i.e. level 2 numeracy, literacy and ICT. The Government should recognise that their aspirations for basic skills entitlement is already set too low and should move rapidly towards implementing funding streams that will allow, particularly within the STEM environment, skills entitlement at level 3.

•

Government should address the traditional limitations on business expenditure on training and development. Industry research suggests that tackling funding shortfalls, either through the tax system or more direct funding to modern apprenticeships, and reducing the level of bureaucracy, would have a positive impact on companies' investment in skills.

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Perhaps the most powerful single intervention that could be introduced in order to ensure that the UK's future skill needs can best be met would be for government to provide coherent continuity across publicly funded 'education and skills' by removing the unhelpful intradepartmental barriers - it is felt there are "far too many cooks". Employers, individuals and - in this case most significantly educational establishments need to be unambiguous as to their responsibilities within the skills agenda, they need to be absolutely clear as to the flow of their funding streams which in turn need to be coherent and not split across various national and regional government agencies (and if they are it should appear to the user that they aren't).

5. I must say that I had difficulty with the EEF's response to Q5: "....At the same time the Government needs to assist in changing the perception of employees that training should be free to the individual (who should recognise that to improve their earnings potential, they should see the benefits of security, employability and even financial independence at an earlier age)." This, to me, sends all the wrong messages. We need more businesses to see why training of its workforce is essential for the good of the business. Of course, individuals benefit as well. It is unhelpful to give the impression that individuals should be doing more to pay for their own training because they benefit from it. 6. Just going back to para 2, as I have said, please do no hesitate to keep your views and experiences coming.

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Regards Roger

From: Leahy, Ged [mailto:gerard.leahy@rolls-royce.com] Sent: 03 February 2006 13:23 To: Bourne Roger (Mr RP) Cc: Scott Malcolm (Mr MJ); Rivers, John R; Rhiannon.chapman@sbac.co.uk Subject: RE: SKILLS Roger, Rhiannon and I have reviewed your points and would comment as follows on behalf of the SBAC/PMB.

RELATIONS WITH SEMTA.
Our relationship with SEMTA has been good; indeed we deliberately set out to engage with and utilise their resources as a means of pulling through and articulating our demand signal .We have committed significant resources into their Sector Strategy Group and in turn they have always been extremely supportive of all of our initiatives/events. Generally we would say that we are satisfied with their performance as data gathers/ analysts/ report consolidators etc to date. Our concerns would be about their capability to drive stakeholders forward from well meaning aspiration to practical delivery/results on the ground where we believe the jury is still out. Successes seem to be ad hoc, tactical and opportunistic as opposed to strategically driven from a truly integrated (and better focused?) action plan. In fairness, these are probably still early days in terms of implementation activity and we are also aware that they are extremely stretched in respect of resources vs.. workload.

WHERE GOVT ISN'T MEETING EXPECTATIONS.
It is widely accepted that the aerospace industry (in common with all industry in the UK) is not currently well supported by the national education system. In a recent (pioneering) National Workshop on Skills & Training for Aerospace initiated by the PMB and supported by the MAA and Rolls Royce, the 50+ participants, all leaders in skills and training in aerospace, concluded that the effectiveness of the current system is no better than 2.5/10. Actions are in hand to improve this - and aerospace has taken a lead nationally in establishing, within the framework of the Sector Skills Agreement, a Skills Delivery programme for the industry to ensure that education and training provision to the industry performs better in the future. We accept that there is an obligation on the part of employers to commit more energy and attention (resources) into addressing these issues. However there is a concurrent need for Govt and publicly funded institutions to be seen to be more responsive, rather than just talking about it, or we run the risk of switching off the renewed interest that has been generated.

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GRADUATE SCIENTISTS AND ENGINEERS
We do have some specific concerns on graduate scientists and engineers. In essence over the years HE has responded to employers who said we need graduates with better leadership, communication, problem solving and teamwork skills etc. etc . Unfortunately in order to develop these skills in their students, universities have ended up doing less of the science and engineering. In turn, universities complain that the students that arrive with them do not have the basic understanding of maths and physics needed to study engineering. In reality our larger companies can select on some of the softer competences and they can train others. However they are not set up to teach the basics. Therefore we would support more emphasis on basic maths and physics. Subjects like Design and Technology are popular with students but there are fears that they are not providing the grounding in abstract thinking and scientific discipline required.

ENGAGEMENT WITH HIGHER EDUCATION.
One of the places that this can happen is with the Engineering and Technology Board - they pull together industry, academia, professional bodies etc. Also a number of our senior engineers sit on bodies run by individual universities usually called Industrial Advisory Panels or something similar. We are also seeking to establish more cohesive links by bringing the Aerospace Training Providers in FE and HE more formally into our Skills Delivery Programme. Jim Angus of Cranfield and the Association of Aerospace Universities is leading on this and has accepted the challenge of demonstrating what providers can contribute at our next National Workshop in March.

LEITCH REVIEW
We chose to support SEMTA'S and some of the other professional bodies responses to the Leitch review rather than submit separately. This seemed to us entirely appropriate in the context of maintaining consistent and common messages from industry to the various govt initiatives. In particular we stand fully behind the SEMTA, EEF and ETB responses a copy of which we attach for ref. Hope this helps Regards Ged Leahy Director of UK Resourcing Services Rolls-Royce plc people link: SIN-A-77 (External) +44 (0) 1332 261677 (Mobile) 07768 845659

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Fax: +44 (0) 1332 244088 gerard.leahy@rolls-royce.com

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Science Engineering Technology

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