What is manufacturing?

1.  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. (Paragraph 3)

2.  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. (Paragraph 4)

Demand for skills: replacement

3.  The need to replace people leaving the industry means that demand for skilled people can be significant even where employment overall is in substantial decline. This 'replacement demand' is forecast to be the major driver for employment in the sector over the next seven years. Skills policy should not, therefore, assume that skill shortages are only concentrated in 'new' manufacturing industries. This has important implications for careers advice, the education system and shaping public attitudes to manufacturing. (Paragraph 13)

Demand for skills: structural change

4.  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. (Paragraph 16)

5.  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. (Paragraph 18)

Skills shortages and skill gaps

6.  The incidence of skill shortages ranges widely across different manufacturing sectors and industries. Some industries, such as food and drink manufacturing, experience far fewer problems, on average, than the economy as a whole. Other industries, such as metals and wood-based manufacture, find that nearly half their vacancies cannot be filled due to difficulties in recruiting employees with the right skills. Understanding of this variation must inform skills policy at every level. (Paragraph 24)

7.  Skill gaps amongst the existing workforce account for a considerably larger percentage of the manufacturing workforce than vacancies caused by skill shortages in recruitment. Skill gaps vary less from industry to industry than skill shortages; however, a similar pattern of concentrated gaps in some industries, such as food and drink manufacture and metals, offset by below average incidence of gaps in other industries, such as publishing and printing, can be observed. Again we emphasise that detailed policy must take full account of these variations and should be as objectively based as possible. (Paragraph 27)

Which skills are in demand?

8.  Technical and practical skills remain the major cause of skill-related problems across manufacturing as a whole. Management and leadership skills were a common concern in the evidence we received and we believe that making management skills a priority area would have beneficial effects on the training of other staff. Basic skills are another key area of concern, along with commercial awareness and the vital but apparently neglected 'soft' skills such as communication and team work. (Paragraph 32)

9.  The specific nature of skill demands varies widely from industry to industry within the manufacturing sector. We therefore believe that whilst high-level targets, such as those outlined in the Leitch report, have some indicative value, policy should be driven by demand in the workplace and the projected demands of employers and the workforce on a sector by sector, industry by industry basis—with Sector Skills Agreements and employer/workforce negotiation key mechanisms to achieving this. Blanket approaches to increasing skill levels run the risk of appearing to meet over-arching targets while not addressing the fundamental issues for some employers and employees. (Paragraph 33)

The skills system: Government departments

10.  Four Government departments have a say in skills matters: the Department for Education and Skills, the Department of Trade and Industry, the Department for Work and Pensions and Her Majesty's Treasury. At present, skills matters in the DTI fall under the remit of the Minister for Science and Innovation. We agree that one Minister cannot be responsible for the Government's extensive science and innovation programme and be conversant with both the needs of industry and the intricacies of the skills system. Thus, having skills ministers in three other Departments makes eminent sense. Nevertheless, within the DTI the current distribution of responsibilities could be seen to suggest an unhelpful equation of skills with science, when the demands of industry are very much wider than that. (Paragraph 35)

The skills system: Sector Skills Councils

11.  Ensuring strong workforce skills is a matter of shared responsibility between government, employers, unions and individuals. The greater role being given to employers in the skills system through Sector Skills Councils is welcome. We note that the performance of these bodies has been variable. We hope that the Sector Skills Development Agency will be active in ensuring that all sectors are represented fairly and in reforming less effective Sector Skills Councils. (Paragraph 41)

The skills system: employees' interests

12.  The private sector must accept its full responsibility and involvement in the skills system. However, a 'demand-led' system should not be a purely 'employer-led' system. Employees' longer-term interests in gaining accreditation for their skills and acquiring transferable skills do not always coincide with the short-term interests of their employers. We therefore believe that the most effective Sector Skills Councils will be those which take significant account of employee, as well as employer, demand and recommend that their remit reflect this. (Paragraph 42)

Funding of training

13.  Although our witnesses have focused on the demand in manufacturing for people with level 3 and higher qualifications, the evidence suggests that those already with better qualifications are more likely to receive privately funded training. The Government should therefore continue to focus funding at level 2 and some level 3 qualifications to address this imbalance. It should ensure that people who undertake funded programmes at this level are given clear guidance and encouragement to progress to a higher level after completion. (Paragraph 44)

Complexity of skills system

14.  Employers are confused by the complexity of the system not least by the division of responsibilities between national sector skills councils, the Regional Development Agencies and the locally-organised Learning and Skills Councils. Employers should not have to deal with significantly different skills structures or policies on different sides of what are, after all, administrative boundaries. We recognise that skills bodies should be able to take regional differences into account and implement initiatives to meet local priorities. Greater co-operation is therefore needed between regions to ensure that the delivery system and policy principles are made consistent. We recommend the Government reconsider whether having a region-led system of funding and provision is compatible with the new powers being given to sector-based, employer-led bodies operating nationally. (Paragraph 46)

15.  We agree with the Department of Trade and Industry that the most important thing is that the skills system should be easy to navigate for employers and learners. This is not the case at present. The current system for publicly funding and providing skills training is complex and confusing. We agree that high-quality brokerage can help employers and learners deal with complexity. This should not be a substitute for structural simplification. Once the current round of reforms has been given time to settle, the Government should look to clarifying the roles of the public-sector bodies involved in skills matters with a view to reducing the number of such bodies. (Paragraph 49)

Vocational qualifications

16.  The current system of vocational qualifications is overly complex and does not have the confidence of the sector. Simplicity is one effective way of maximising recognition and therefore potential value among both employers and employees—complexity a way of minimising both. Without the confidence of industry, such qualifications will have little value to employees. We welcome greater employer involvement in the development and approval of qualifications through the Sector Skills Councils and hope that this will lead to a major rationalisation of vocational qualifications. We stress that the resulting qualifications must be recognised and valued as a measure of ability across the whole economy, not just in the sector that helped develop them. (Paragraph 56)

17.  The Trades Union Congress wants a statutory right for employees—to be able to train for a level 2 qualification in work time—a proposal that the Leitch report has recommended should be implemented if sufficient voluntary progress is not made by 2010. We agree. (Paragraph 58)

Work force training

18.  The manufacturing sector trains a lower proportion of its workforce than the economy as a whole: between one half and two-thirds of the workforce do receive training funded or provided by their employer. Companies who do not train their staff are overwhelmingly those with fewer than 25 employees. The Government should therefore focus its assistance on small employers to help them to begin training their staff and should consciously reach out to smaller firms. However, larger companies tend to train a smaller proportion of their staff than smaller companies. Government should also be encouraging larger employers to train a higher proportion of their staff and spread best practice through their supply chains. In both cases, a close link between training and business strategy should be encouraged. (Paragraph 61)

19.  Employers have strongly expressed their preference for 'on the job' training in the workplace. Public sector skills providers would be well-advised to 'go with the grain' of employers' strongly held convictions and aim to facilitate this where possible in return for a commitment by employers to provide paid time for employees to undertake training. Government, the National Skills Academy for Manufacturing and Sector Skills Councils should work towards a form of national accreditation for in-house training that recognises its value and establishes common standards at a basic level without being prescriptive as to its exact content or method of delivery. (Paragraph 64)

'Train to Gain'

20.  We welcome the Train to Gain approach of actively targeting firms to identify and address their specific skill needs and we endorse Lord Leitch's proposal of a similar approach for individuals. We believe that Train to Gain should continue its focus on smaller firms, with the aim of promoting training among companies that do not at present train their staff. We also recommend that a nationally coherent system of brokerage be established as soon as possible. (Paragraph 67)

Apprenticeships

21.  We welcome the improvements in the number of Apprenticeship places and completion rates. The Government should work towards the Leitch report target of 500,000 apprentice places by 2020 but only insofar as this reflects genuine demand in the labour market and the varying needs of specific industries. Government workforce planning, even for its own workforce, can leave a lot to be desired; as we have seen, for example, with the problems concerning the excess numbers of nurses and doctors recently trained (c.f. Modernising Medical Careers). (Paragraph 70)

22.  We note that the concerns raised regarding vocational qualifications extend equally to the NVQ element of Apprenticeships and Advanced Apprenticeships. With the skills base line for employability in the sector rising, Government should make the accreditation of Apprenticeships more robust and relevant to the needs of the industry by including them within the Sector Skills Council-led process for developing and approving vocational qualifications. (Paragraph 71)

23.   In view of the importance of increasing the skill levels of the existing workforce and in the light of the finding of our predecessor Committee that women are more likely to try and break into a traditionally male-dominated sector after several years in the workforce, we welcome the extension of Apprenticeships to over-25s as a major step forward. (Paragraph 72)

Image of manufacturing

24.  It is vital both to get the message across that manufacturing output is growing, with significant employment opportunities, and to counter the perception generated by media coverage of factory closures and the related political expressions of concern. For this reason we welcome the DTI-led Manufacturing Forum's work on promoting manufacturing across the country and the establishment of a media centre to underpin that work. We hope that employers, their representative organisations and trades unions will support this initiative enthusiastically and will do still more to promote a positive image of the sector. Government can facilitate and encourage activity of this kind, but it will only be effective if the people actually engaged in manufacturing are seen to be supporting the message with enthusiasm. Politicians too need to demonstrate a willingness to balance their legitimate expressions of concern about bad news with recognition of the many good things that are happening in UK manufacturing. (Paragraph 90)

Attracting young people

25.  Negative perceptions of manufacturing do exist among some young people and are widely held to be responsible, at least in part, for the sector's difficulties in recruiting skilled people. We received evidence asserting that these perceptions are embedded in the education system, and in particular in the careers advice young people receive. We suspect that those assertions may be accurate. We note that the Government is making some reforms to careers advice; however, we strongly recommend that the Government, in the light of the Leitch report, move towards a universal careers advice service, to introduce a coherent and unbiased system that engages children in schools at an earlier age and continues into adulthood. (Paragraph 78)

26.  Work experience is one way to improve interest in manufacturing among young people. The Government should look at ways to ensure access to high quality manufacturing work experience for school children across the education system even before the age of 14. (Paragraph 79)

27.  We believe that the Government's efforts to encourage young people into science, engineering and technology subjects, and establish new qualifications for manufacturing—including the 14-19 Specialist Diploma—would be of even greater benefit to the sector if the negative view of young people towards manufacturing were successfully tackled. (Paragraph 80)

Attracting graduates

28.  We note the concern of manufacturers about the number of graduates in science, engineering and technology subjects. We support the Government's attempts to encourage young people into studying science subjects. We believe that the Sector Skills Councils should look urgently into how industry can more effectively recruit from the existing stock and annual output of SET graduates, in particular those who find themselves unemployed six months after graduation or who go into non-SET careers immediately after leaving university. (Paragraph 83)

Recruiting women

29.  Breaking down perceived gender-stereotypes around manufacturing would significantly increase the pool of skilled labour available to employers. We believe that government should be promoting this message strongly to employers in the sector in addition to the Government's initiatives aimed at attracting female applicants. (Paragraph 88)

30.  We reiterate the findings of our predecessors' report on Occupational Segregation; simply marketing the sector to women is not enough to make it accessible. Other barriers need to be addressed, including hostile workplace cultures and inflexible working hours. There are examples of companies where these barriers have been successfully overcome, and Sector Skills Councils should take an active role in promoting best practice in these areas. (Paragraph 89)