Structural change
14. Lord Leitch's report on skills in the UK stressed
the important role of skills in improving productivity relative
to international competitors.[14]
These concerns are particularly pertinent for manufacturing industry.
Although in 2005, manufacturing accounted for only 13.6% of national
GDP, the sector was responsible for 54% of UK exports and 60%
of imports.[15] This
high level of exposure to international competition makes concerns
about productivity especially important to manufacturers; several
of our witnesses stressed the importance of export activity to
the sector and the link between a competitive level of productivity
and export activity.[16]
15. The Trades Union Congress told us that manufacturing
in the UK "is increasingly a sophisticated industry and its
future depends on moving up the value chain, involving as it does
much more complex functions including greater emphasis on design,
technology and service and providing more niche markets."[17]
In many respects the process of structural change experienced
in manufacturing broadly accords to that outlined in the Leitch
report for the economy as a whole and is resulting, inevitably,
in higher demands on skills.[18]
The EEF told us: "Within the manufacturing scenario we used
to use quite a lot of unskilled labour. Today, we need more and
more skilled labour at various levels. That trend will continue
right the way through the next decade or so."[19]
16. Manufacturing
is undergoing a period of significant structural change, moving
the sector towards higher-value production based around niche
markets. This is leading to a demand for higher-level skills across
many industries. Skills policy must therefore aim to increase
demand among employers and employees for training and skills,
as well as responding to the current demands of employers.
17. Semta, Amicus and KPMG all told us that a level
3 qualification—the equivalent of two A-levels—is
increasingly becoming the minimum requirement for entry into science
and engineering firms and manufacturing more widely.[20]
Improve said that food and drink manufacturers will be demanding
mostly level 3 skills by 2014 and an "absolute minimum of
level 2 qualifications across the sector".[21]
The trend towards fewer jobs at a higher skill base represents
a significant challenge for the sector. As Diagram 1 shows, the
manufacturing workforce is substantially less qualified, on average,
than the UK workforce as a whole. At present, 51% of the manufacturing
workforce is not qualified to level 3 and 12% have no qualifications
at all.[22] The situation
is especially pressing for food and drink manufacturers, where
52% of employees are not even qualified to level 2 and 28% have
no qualifications.[23]
Labour Force Survey 2006; Leitch, para 3.46
18. Our
witnesses have suggested that the possession of a level 3 qualification—the
equivalent of two A-levels—is increasingly becoming the
base-line for employability in manufacturing. With over half of
the present manufacturing workforce not qualified to this level,
increasing the qualifications base of the sector should be a major
priority if UK competitiveness, jobs and exports are to be maintained
in the face of growing international competition from established
and emerging markets.
19. Structural change in manufacturing is also broadening
the types of skills required by employers. Both the EEF and CBI
have stressed to us how "whilst a manufactured product may
well be at the heart of a manufacturing business very often it
is earning a lot more profitability from things around that product,
particularly the service side of the business."[24]
This underlines the trends towards requiring more personal, management
and service-type skills among manufacturing employees.[25]
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