There is little net growth in the economy but the UK needs to reduce unemployment. How are manufacturers hiring, and are they helping NEETs to get onto the conveyor to work? Will Stirling reports.
Job creation has been one of Britain’s top economic and policy issues in 2012, as the country creaks under the weight of a eurozone crisis that is strangling business investment.
So announcements in July from Jaguar Land Rover and Hitachi Rail that they would both create large numbers of new jobs shone welcome rays of light through dark skies.
JLR promised a stonking 1,100 new jobs to make the new Jaguar XF Sportbrake and other existing models, while Hitachi revealed that it will support 900 new jobs building intercity trains at its new Newton Aycliffe factory. And both announcements came in the face of a 0.7% fall in UK GDP in the three months to July while manufacturing output – as calculated by the Office for National Statistics – was down a dispiriting 1.4% for the quarter.
“ADS is pushing the development of composite capabilities within the Aerospace Growth Partnership to secure this competitive advantage for the UK” – Graham Chisnall, deputy CEO, ADS
Indeed by the time July’s ONS figures had officially confirmed the double dip recession, the UK was experiencing an economic contradiction – falling GDP but rising employment, a trend which was amplified as the London 2012 Olympic Games reached their peak. The private sector created 205,000 jobs in the first quarter of 2012 and this rose a further 201,000 in Q2 – impressive given the business conditions and a welcome foil for the steady decline in public sector employment.
But maintaining job creation is crucial if the country is to recover. In the UK and across Europe, unemployment rates, particularly youth unemployment, are shocking. A generation are taking longer to find work and the jobs are not what many expected, a situation that prompted the introduction of the Youth Contract; giving employers a cash incentive, worth £2,250, to take on a person between 16-24 years old.
While growth is near zero, what challenges are manufacturers, other than big hitters like JLR and Hitachi, facing to recruit the people they need in order to stay competitive? And how are manufacturing companies helping the societal need to get people out of the Neet (not in education, employment, or training) category?
Capitalising on what growth is there
Government figures show that manufacturing employment remained more or less static between the first quarter of 2011and Q1 2012, falling by 0.3% (or 7,000 people) to 2.82m (the ONS Workforce Jobs estimate has it at 2.56m).
But while the job numbers are broadly flat, the sexy engineering sectors – aerospace, automotive, advanced engineering and avionics – are buoyant and hiring with abandon.
The Society of Motor Manufacturers and Traders said in June that, following investment of over £5.5bn into UK automotive in the last 18-months, the car industry was on track to produce a record-breaking two million units in 2015. Consequently, car companies have been recruiting fast. For example, Vauxhall’s contract to continue production at Ellesmere Port brought 700 new jobs and Jaguar Land Rover’s 1,100 new jobs in July added to 8,000 new roles at the company in the last two years. Nissan, too, is struggling to recruit the line technicians and fitters it needs quickly enough – when it completes its current recruitment drive, the Sunderland plant’s workforce will number a record 6,225.
Aerospace employment is brisk too, though not without its problems even with sales figures at this year’s Farnborough Airshow (p76) suggesting the sector has flown straight over the recession.
For example, Magellan Aerospace, a Canadian company with factories in Wrexham and Bournemouth, makes rib supports for wings in the UK. In July it won a £370m contract extension to supply parts to Airbus. Haydn Martin, corporate director for business development at Magellan Aerospace UK, says the company has invested heavily in machines, tooling and people, but has still had to recruit machine operators from Poland to meet demand.
Specific skills are in very high demand in the aerospace sector. The UK’s capabilities in composite material manufacturing for aerospace is becoming genuinely world leading. “In the UK you have Bombardier, GKN, Airbus and Spirit Aerosystems, plus a growing supply chain and the National Composites Centre in Bristol, all developing specialities in composite technologies,” says Graham Chisnall, deputy CEO of the aerospace trade body ADS. “This is why ADS is pushing the development of composite capabilities within the Aerospace Growth Partnership, to share the common needs of these companies and to ensure we do all we can to secure this competitive advantage for the UK.”
But with any collaboration in industry comes a dose of competition. These businesses are fighting over the same people.
“Composite engineers are rare,” says one recruitment consultant with just 300 people on his books in the UK with the words ‘composite’ and ‘engineer’ in their job title and just a handful more with the word ‘composite’ on their CVs.
“A lot become contractors, drawn by more money as they know they can hop around for the best deal.” The rest are in secure jobs with good benefits and hard to extract when vacancies arise. “We’ve had quite a lot of composite qualified vacancies which have gone unfilled for months because we can’t find the right people,” says the recruiter. “Aerospace is competing with motor sport for these people. Formula 1 is doing well and the wages there are higher. In my view [the shortage of labour] is a massive business risk to companies investing in this area of technology.”
The agency has seen a rise in the number of aerospace vacancies filled by applicants from outside the UK, but the vast majority are still filled by British nationals. In July, Prime Minister David Cameron pledged funding for a 500 further Masters degrees in aeronautical subjects in response to the need for these skills.
The Work Programme
But what about long term employment for those with more general skills?
The Work Programme (WP) is a government programme to get the long-term unemployed back into work. It is delivered by specialist providers in the public, private and charity sectors and in July the Department for Work and Pensions, the scheme’s controllers, said about a quarter of the people who had secured a vacancy through the scheme were still in work. One WP provider, Ingeus, said about 17% of its clients are placed into manufacturing and engineering roles, a high proportion compared with the other industries they service.
Interview with John Cridland, director-general of the CBI
TM: What can be done to stimulate job creation?
“Only economic growth creates jobs, but the picture is not gloomy. SMEs especially are out there reorientating their export performance away from the flat European market to parts of the world like Mexico, Egypt, Indonesia, where over time there is huge potential for British products.
The labour market evidence is much more positive than the overall economic picture. In the first quarter of the year the private sector created 205,000 jobs compared to the Q4 last year – that says something about the opportunity for growth.
TM: How does Britain’s Neet (Not in employment education of training) rating and its skills base affect foreign direct investment?
Foreign companies looking to invest in the UK would be concerned about the inability to source sufficient STEM skills, particularly at technician level.
Young people think [engineering and manufacturing] are sunset industries and need to be persuaded that they are sunrise industries.
The Neet problem kicks in here. Britain’s rating is 13.4%, lower than the OECD average, but if you’ve got up to half of all young people leaving school without five GCSEs grades A-C every year, then you’ve got a group of young people who should be available for some apprenticeships who are slipping into that Neet category.
TM: Are internships effective in leading to full-time jobs?
All the evidence shows that internships are a very important part of reaching into the labour market. Unemployed graduates’ first choice would be to have a paid job but if can’t get one they’d be much keener having an unpaid internship than sitting at home with nothing to do.
It has dispirited me this year that commentators have criticised the notion of an unpaid internship. Clearly we mustn’t exploit young people but there is absolutely nothing wrong with giving young people an opportunity. The businesses that do so should be congratulated.
Interns are in control of their own agenda. Unlike salaried employees who are required to turn up and work their contracted hours, unless they’re sick, an intern can walk away if they feel the placement is not working out for them.
TM: Are employers engaging with the Work Programme?
The first figures from DWP showed that 25% of the first tranche of work programme referrals were still in work 13-weeks after the end of their WP assignment. That’s a good start.
The problem is that the WP has been launched in very difficult economic circumstances – again, jobs are only created if the economy has growth. Employers cannot take on people that they do not need for demand that they cannot predict.
But the WP does link with the Youth Contract where there’s a job subsidy and I’m certainly encouraging my members to give the young unemployed a chance, and to focus on this group. The effects of youth unemployment are scarring.
TM: Will the Beecroft report proposals stimulate job creation?
SMEs are really nervous about taking on liabilities, long term employment, that they don’t think they are in control of. Employment tribunals have become really off-putting to small companies in taking on an extra person. The trick therefore is to reduce the burden of employment tribunals.
Maybe there are other ways of doing it such as making tribunals less of a concern by reducing the aggravation of an overly legalistic process.
TM: Should National Insurance be cut?
We must be realistic. The CBI would always love to lower taxes, particularly targeted at taxes on jobs, which is what the NI is, but we would also absolutely support the Government on fiscal austerity and it’s not appropriate for us to call for unfunded tax cuts.
What we need is targeted reductions in labour costs, which is why I worked with the Government to come up with a job subsidy in the Youth Contract. The £2,275 you get back as an employer if you employ a young person for six months is four times higher than the NI you would have paid during that six months.
Talent Retention Solution
In the past British industry was guilty of letting skills disappear following large scale redundancies.
Step forward the Talent Retention Solution (TRS). Launched by sector skills council Semta last July, it started running in earnest in January and aims to help companies repurpose skilled employees when redundancies are inevitable.
Sponsorship of the TRS costs £25,000 and current sponsors include Airbus, BAE Systems, EDF, Nissan, Rolls-Royce, Siemens and Shell. The scheme has about 2,000 highly skilled employees on its database, a third of which are people who have, or are set to lose, their jobs at BAE Systems.
Companies with fewer than 250 employees can use the TRS for free while there is a fee of £2,000 to join for companies between 251 and 500 employees and £5,000 for those with more than 500 staff.
Richard Smith of Winchester Consulting, which operates the TRS, says that it aims to bring the costs down as more firms join. Rolls-Royce has associated the recruitment of 60 people with TRS and Nissan recently spoke directly to BAE Systems about repurposing staff from BAE’s armoured vehicle factory in Newcastle to Nissan, which is desperate to recruit technical people to satisfy its own growth curve.
The service is seven months old and measuring its success is tricky. “Because we are not set up as a recruitment agency, the exchange is directly between employers and individuals,” says Mr Smith. “This can often mean that when people apply for jobs their application can be directed to the employer’s main website, which means we rely on feedback from the individual or employer about the outcome.”
For more information about the TRS go to: www.talentretention.biz
The manufacturers speak
Lost generation thwarts growth potential
Unison, manufacturer of tube bending machines, Scarborough
Managing director Alan Pickering says the location of his business is “like an island off the coast of the mainland as far as engineering recruitment is concerned! We are growing rapidly at the moment but are being limited significantly by the lack of suitable personnel.”
Mr Pickering identifies a “black hole” in the market for engineers aged between 25 and 35. “It seems a generation simply turned its back on engineering and shame on our governments for letting this happen,” he says. “There are engineers out there who are close to retirement age, and some in their 40s, but we see hardly anything coming from the 25-35 year old segment.”
Mr Pickering admits he hasn’t yet looked into the Work Programme as an aid to recruitment but expresses concerns about its suitability. “My key issue would be how motivated these people are to work. Working with apprentices has been great as we have got to them straight from school or college, and we have helped to shape their attitudes towards work. But finding experienced electrical and mechanical engineers who can slot into positions straight away is very difficult.”
To combat this Unison has outsourced more of its manufacturing.“We have also come to a decision that we will accept remote working – to allow us to access engineers in more established regions such as, say, Manchester,” says Pickering.
“There are engineers out there who are close to retirement age, but we see hardly anything coming from the 25-35 year old segment. Shame on our governments for letting this happen” Alan Pickering, MD of Unison, British tube bending machine company
AkzoNobel: Helping recruiting and communities simultaneously
Coatings and chemicals company AkzoNobel takes a CSR approach to engaging with the unemployed. Dulux Decorator Centres have run ‘Colour in the Community’ for many years.
Now under the Dulux Let’s Colour programme, Akzo has pledged to “colour one million lives by 2020”. This can be community funding but often it is by helping deprived areas with paint and labour to brighten up their surroundings. In Britain it works with Groundworks UK on six flagship projects, and over 80 Gold+ projects, where it works with volunteers in the community on urban regeneration. “We’re giving our expertise, and our paint, to help transform communities,” says Alex Price HR manager at Akzo. “We want to help people that need it, but it also gets AkzoNobel’s name into local communities in the hope it will attract people to come and work for us.”
Mr Price says that the outreach programmes the company runs tick three boxes at once: promoting the company’s values on social responsibility, a soft-touch recruitment drive and broadcasting its sustainability values. While the paint is donated, it is non-toxic and receivers are taught about how it should be disposed. “Young people today are really interested in what people are doing in sustainability,” he says. “This campaign we’re doing sets us apart from other companies in showing our approach to this issue.”
AkzoNobel cut the ground for its new £100m coatings factory in Ashington in June. An important part of its community outreach programme is to vet the potential future employees of this factory, says Price. “That might mean identifying some good candidates while it’s being built and help them in several ways, such as mentoring, to improve their candidacy.”
“As a business we also have a duty of care to improve the image of manufacturing for women. Women are underrepresented at our company.” Akzo is about to launch a poll for
women in the Ashington area to discover what women want from a manufacturing career.
GKN Aerospace: Finding suitable people on a fast growth curve
GKN Aerospace is only 13-years old but is one of the fastest growing divisions of British engineering group GKN plc. In the last decade the company’s global aerospace business has grown from around £400m turnover to £1.5bn in 2011, largely through acquisition. It then acquired Volvo Aerospace in July, taking revenues to £2.1bn and its portfolio in civil and military has allowed it to forecast organic growth of around £500m by 2015, with just under 9,000 staff currently.
The issue it faces is not stagnation but recruitment to service its growth targets, with about half the business in the UK and Europe.
In response the company ramped up its apprenticeship schemes. In 2008, before the Filton acquisition, it employed 30 apprentices in the UK. Today it has 120, which will rise to an intake of about 45 each year with 150 at any one time.
Andrew Harvey, senior HR executive at the company, says “[Our growth] meant very detailed forecasting of what types of people and skills the business will need in the next 10 years, to meet that organic growth forecast. We analysed that we would need 1,900 more employees in that period.”
Engineering in this market, he says, is a very competitive environment. “We put pre-recession measures in place particularly to meet the demand for design, analysis and stress engineers within aerospace. We’ve got to look seriously about how we develop our own engineers at a higher level to meet the demand. We need to up our game.”
He says GKN is now developing Level 4 NVQ and Advanced Apprenticeships – a lot of potential for people who might have gone to university who’d now find it harder financially. “We are seeing some evidence of people joining the Advanced schemes who, hitherto, would have gone to university,” says Harvey.
If these people are in such high demand, do you have to offer more money?
“Manufacturing has become a more attractive sector, certainly here, for young people,” says Mr Harvey. “We’re a growing, acquisitive company and that acts as a magnet. Yes, there’s an element of the package competitiveness you offer. But in many cases with engineers it’s about the types of technologies and programmes [e.g. aircraft] they’ll get to work on and the technical challenge as much as the remuneration.”
Harvey has discussed the schemes to get Neets into GKN Aerospace, with managing director Marcus Bryson and head of government affairs Jon Dennison to see how GKN could support the Work Programme to give more of this group an opportunity within the company. Both individuals were keen to help but it will be a challenge for GKN, and companies like it, to find suitable ways to progress Neets, many of whom have few if any hard skills.
Full details of GKN Aerospace’s recruitment programme, AkzoNobel’s community work and Unison’s comments are online at themanufacturer.com
Conclusion: Should companies try harder to accommodate Neets?
EEF and the CBI say it’s not for businesses to take on new staff when they cannot accurately predict the demand for their products. But with so many, especially young people, out of work there is a societal need for companies to do as much as they can to give people an opportunity.
Many companies are doing as much as they can already. Automotive manufacturer Tallent, for example, has brought in more school children to its factory recently as a deliberate first step in a selection process for an expanded apprenticeship scheme. Many firms, like Unison, need to scrutinise the merits of the Work Programme more closely to establish the associated risk.
But it’s clear that UK manufacturing, particularly those sectors experiencing rapid growth, can have a crucial role to play in reducing the number of Neets, when the wider environment is relentlessly flat.
