1. This inquiry is one of a series being held by us into the future of UK manufacturing. The subjects for the series were determined after consultation with the Trades Union Congress and employers' organisations. This Report, the first to be published, addresses the extent to which a lack of skills in the UK workforce is hindering the development of manufacturing, the extent of demand for better skills and the ways in which government is attempting to meet and increase that demand.

2. We recognise that the debate about skills in the UK economy is a very old one indeed. The first Select Committee report into the industrial skills base was undertaken in 1867. Since then, there have been numerous committee reports, Royal Commissions and White Papers, 23 between 1867 and 1969 and many more since then.[1] Indeed, we estimate that there has been a major report on the subject, on average, at a rate of one every two and a half years since 1867. However, we were struck by the unanimity of view from those we consulted before undertaking this inquiry that this was one of the most pressing issues facing manufacturing. This has been reflected in the quantity of evidence we have received—much more, for example, than into a parallel inquiry, also identified as important by those we consulted, into public procurement.

3. 'Manufacturing' is a broad term, covering industries ranging from electronic engineering through to food processing. As a sector, it is defined as those industries that involve transforming an idea into a physical product that can then be sold in the marketplace. This includes, but is not limited to, those industries regarded as traditional manufacturing industries, which involve turning raw materials into products.[2] We agree with the CBI that the traditional understanding of what constitutes manufacturing is too limited. Design, logistics, after-sales service and marketing, for example, have grown in importance as part of the total value of the product. This means that these activities, traditionally seen as part of the service sector, are becoming central to manufacturing companies and to maintaining their competitiveness in a globalised economy. The traditional hard and fast distinction between the manufacturing and service sectors is therefore becoming less and less helpful to a true understanding of the UK economy. This may explain why, as we report later, some less traditional skills are now seen as being essential to the future of manufacturing.[3]

4. Even on traditional definitions, manufacturing remains an important part of the United Kingdom economy. In 2005 it accounted for 13.6% of national GDP and 11.8% of all employment. In the same year, manufactured products accounted for 54% of UK exports and 60% of imports. Despite its decline relative to the service sector, manufacturing has grown in absolute terms over the last 20 years by an average of 1.2% a year. Investing in manufacturing skills is an investment in a growing sector of the UK economy not, as is often assumed, in a contracting sector.[4]

5. The previous Committee's report into manufacturing productivity, published on 13 June 2002, found that: "Shortages of skilled employees have hampered growth in manufacturing industry, as well as limiting the potential for switching to high tech industries."[5] Since then, the issue of workplace skills has been raised as a matter of concern with our predecessors and us on a wide variety of manufacturing-related subjects, including during inquiries into the automotive sector and, most recently, into Airbus.

6. Education and skills are a devolved matter in Scotland, Wales and Northern Ireland. This Report therefore focuses on the manufacturing skills base in England. It should be noted, however, that certain areas of the Government's Skills Strategy have a broader remit. In particular, the Sector Skills Councils and Sector Skills Development Agency have a UK-wide remit.

7. Manufacturing is covered by five Sector Skills Councils: Semta (the Science, Engineering, Manufacturing Technologies Alliance), plus those that are awkwardly named, i.e. Proskills (building products, coatings, extractives, glass and printing), Skillfast-UK (textiles and related industries), Improve (food and drink manufacturing) and Cogent (chemicals and energy).

8. Later in this Report we express concern about the complexity and proliferation of qualifications. Although there is increasing awareness of what constitute the five basic levels of qualifications, it should not be assumed that all employers and employees have anything like an adequate understanding of the purpose and details of each level. The official definitions of these levels can be found on the Qualifications and Curriculum Authority's website, but we do not believe these are particularly helpful.[6] Forthcoming changes to the Qualifications and Curriculum Framework will see three more levels added and levels 4 and 5 reformed.[7] For the purposes of this report, however, we have retained the five level approach:

Lord Leitch, Prosperity for all in the global economy - world class skills (2006), Box 1, Pg 6; http://www.link2learn.co.uk/content/default.asp?PageId=90

9. During this inquiry we took oral evidence from EEF, The Manufacturers' Organisation; the Trades Union Congress; the Confederation of British Industry; Amicus; the Skills for Business Network, the Learning and Skills Council, the Department for Education and Skills and the Department of Trade and Industry. We received 32 written memoranda and supplementary memoranda from trade organisations, unions, employers' representatives, companies and individuals. We express our gratitude to all those who submitted evidence to us.

2   Q 133 Back

3   Appendix 11 (Confederation of British Industry) Back

4   National Statistics Database (Series CKYY, GDQS,CGCE) Back

5   Trade and Industry Committee, Third Report of Session 2001-02, The Competitiveness and Productivity of UK Manufacturing Industry, HC 597, para. 25 Back

6   www.qca.org.uk/14-19/qualifications/116_nvqs.htm#defin Back

7   www.qca.org.uk/493_15772.html Back