| Pathfinders to the Parliament |
| ENGINEERING SECTOR PATHFINDER | ||||
| Introduction | ||||
| The Scottish engineering industry welcomes the opportunity to assist the new Scottish Parliament by presenting views on various matters which the new Parliament may wish to address when it is established later this year. | ||||
| The Pathfinder Group for Engineering (see Appendix 1: Group Members) has consulted widely across the engineering industry in Scotland via: | ||||
| - personal industry contacts; | ||||
| - a letter from the Pathfinder Group Chairman to the 370 member companies of Scottish Engineering seeking views and input (see Appendix 2: Scottish Engineering); | ||||
| - seven Scottish Engineering District Meetings around Scotland (see Appendix 3: District Meetings); | ||||
| - a meeting of the Scottish Engineering Executive Committee in Glasgow 11 February 1999; | ||||
| - contacts with external bodies having direct involvement in the engineering industry in Scotland. | ||||
| By consulting widely, the Pathfinder Group believes it has obtained a clear consensus regarding the key issues which the engineering industry in Scotland would like the new Scottish Parliament to address. | ||||
| Current industry views are inevitably coloured by the difficult trading conditions presently being encountered. Recent quarterly survey results from Scottish Engineering(1) show a disturbing picture. Weakening export demand has been followed by a decline in domestic order intake and resulting downturn in overall employment levels despite some positive upbeat responses from a few engineering companies. | ||||
| The cumulative effects of the high level of sterling combined with shocks to the global economy and slower growth are taking a painful toll. During 1999 the Scottish engineering industry expects to face the combination of a further deterioration in domestic demand and the lagged reaction to lost export business. | ||||
| Executive Summary | ||||
| The Pathfinder Group on Engineering has consulted widely on key issues which the Scottish Parliament is invited to consider. A wide range of topics was raised resulting in a number of recommendations which the Scottish engineering manufacturing industry would encourage the Scottish Parliament to adopt. | ||||
| It is noted that there is scope within the Scottish Parliament to tackle key aspects in relation to lifelong learning, provision of skilled employees, harmonisation of higher education provision, the work of Local Enterprise Companies and transportation. It is recommended that the Scottish Parliament should introduce a jobs impact audit as a means of assessing the potential effects of proposed legislation before it is adopted. | ||||
| The Pathfinder Group welcomes the proposed inclusive nature of the Parliament and advocates the use of non-voting industrialists to assist at the Committee stage when considering matters affecting industry. | ||||
| Overview | ||||
| The engineering industry in Scotland needs a "level playing field" relative to its competitors elsewhere in the UK and beyond. The Scottish Parliament must therefore generate so far as its powers permit, a climate conducive to wealth creation free from impediments to growth and investment made possible by easing burdens on business, applying only minimal sensible regulation and removing disincentives, actual or perceived. Those basic objectives would be comparable with Scottish Engineering's motto - "Promoting Prosperity". | ||||
| The Pathfinder Group would like to see wealth and job creation at the kernel of the Scottish Parliament's ambitions. For the engineering industry, which in job numbers has been contracting through increasing productivity and the more efficient use of capital and equipment, the Group seeks to secure higher quality, sustainable employment. In short, a switch is needed from subsidising the past to laying the foundations for the future. Priorities for a wealth creation agenda should be: | ||||
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| Without those, Scotland's competitiveness will be eroded, living standards will fall behind those of our competitors and unemployment will become entrenched. | ||||
| Particular attention ought to be paid to: | ||||
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| Main Topics Raised | ||||
| Lifelong Learning | ||||
| Fundamental to the prosperity of the engineering industry is the achievement of a flexible skills base with scope for personal development by individuals so as to underpin a supply of well qualified, high calibre engineers who are "self starters" and who, given the right opportunities, will help to attract and grow businesses. An education and training structure in Scotland aimed at bringing on more high calibre engineers would create better prospects for the growth of indigenous engineering businesses and would enhance the growth of established engineering companies as well as attracting more inward investment. | ||||
| Survey evidence of engineering employers in Scotland indicates that overall employee skills need to be enhanced for the future. The gap between current employee skills and those required for the future is particularly apparent in "technical skills" (2). | ||||
| Certain sectors of the engineering industry require longer horizons for investment decisions, both for product research and development and to enable their employees to develop the necessary skills to maintain a cutting edge in technological advance. Examples are to be found in engineering companies involved in and supplying the aerospace sector. Longer term training plans can only be founded upon dependable and collaborative relationships between our higher education institutions, the engineering industry and their customers. | ||||
| More specifically, there is an opportunity for university engineering departments to become more market orientated. There is also an opportunity to rationalise by specialising in particular areas of engineering expertise and to realise the potential for added value, both within individual engineering departments and in consort with others instead of allowing university departments to continue to compete across a broad range of engineering disciplines. Rationalisation could be by geographical area, by particular engineering disciplines or by aligning with sectors of industry. This would enhance opportunities for post graduate research, Continuing Professional Development and lifelong learning. This approach would be consistent with the recent COSHEP Survey Report (3) and would elevate the standing and prestige of those institutions into Centres of Excellence as well as contributing to a more productive supply of high calibre engineers. | ||||
| Links forged between centres of higher education and the engineering industry are most often associated with larger manufacturing businesses. More needs to be done to foster links between higher education establishments and SMEs. Just because a business is small does not mean that opportunities do not exist for innovation and improvements in productivity. Beyond closer contacts and necessary encouragement, financial incentives to undertake research and development and skills development are essential, even acknowledging that fiscal powers are mainly reserved issues. | ||||
| It is now widely recognised that a jobs-rich Scotland will require lifelong learning with solid foundations laid in schools followed up by a continuous need to up-skill and re-skill. | ||||
| Increasingly individuals, in partnership with Government and employers, have to take on responsibility for their own training. Initiatives to help individuals build up their own training credits or accounts can be a powerful enabling tool. | ||||
| Despite claimant unemployment in Scotland running at approximately 5.5% of the workforce, many engineering companies cannot find the skilled recruits to remain competitive and in order to foster the knowledge based economy more resources need to be devoted to up-skilling and re-skilling. Specific shortages highlighted relate to software engineers, skilled technicians and design engineers. | ||||
| It is recognised that an inclusive policy of personal and corporate commitments to lifelong learning often involve sweeping cultural changes, but through initiatives such as a University for Industry and Individual Learning Accounts the process can be given a much needed boost. | ||||
| Engineering businesses have of course to identify their own skills and training needs in the first instance and supporting bodies have an important role in benchmarking and identifying future needs, but mechanisms have to be in place to encourage investment in skills and training for the industry. To encourage more youngsters into the engineering sector it is vital that the overall status of engineering is enhanced such that it is viewed as a worthwhile and respected profession. The Pathfinder Group would welcome support from the Scottish Parliament for the work already being undertaken by engineering companies by: | ||||
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| So far as fiscal and financial constraints permit, incentives for individuals to learn are an integral part of a progressive society, preferably coupled by giving individuals a financial stake in the prosperity of their employers' businesses and by doing so foster commitment, innovation and productivity. Where new initiatives are taken in a UK context, Scotland is ideally placed in terms of size and access to educational resources to pilot schemes with those aims in mind. | ||||
| Inward and Indigenous Investment | ||||
| The Pathfinder Group applauds the success of Locate in Scotland in attracting inward investment but detects a perception within the industry that grants are apparently slanted in favour of incoming investors at the expense of indigenous manufacturers. | ||||
| Furthermore, we believe that financial support should be judged, not simply by the crude measure of new jobs created (important though levels of employment in the economy undoubtedly are), but by the quality of employment opportunities provided. Businesses which depend upon research and venture capital very often make a greater contribution to Scotland's economic well-being in the long run than say, lower skill employment opportunities aimed at volume production but with an uncertain or short lived outlook. The key question should therefore be "what value added can be achieved" rather than "by what number can the unemployment figures be reduced". The introduction of high value added companies will in turn help to create additional employment via support companies. By encouraging high quality, value added enterprises those businesses can be anchored to the Scottish economy and in consequence can attract supporting business to locate here. Such organisations are less likely to be lured to lower labour cost economies. | ||||
| Anecdotal evidence from Scottish engineering companies competing in European markets shows that our continental European competitors receive public financial support. Assistance to the engineering industry is too often approached and evaluated from a short term, minimal risk perspective. Again, our European competitors are known to take longer term horizons; a model which should be replicated in Scotland. The Pathfinder Group welcomes the current review of the banking sector in the hope that one outcome will be mechanisms to enable banks to take a longer term view in their support of growth businesses on a par with continental banking practice and move away from a culture of sustaining short term pressure on fledgling companies. | ||||
| The Scottish engineering industry has a vision of a technically literate Scotland, eager to apply new knowledge to creating tomorrow's jobs. To encourage technological innovation the Pathfinder Group believes that Scotland needs to: | ||||
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| The Pathfinder Group for Engineering welcomes proposals announced recently to re-examine the criteria for Regional Selective Assistance. | ||||
| Local Enterprise Companies | ||||
| Engineering companies have reported a wide variation in the quality of assistance and encouragement received from Local Enterprise Companies (LECs). Some LECs have been praised for proactive involvement and quality leadership, but in other instances, engineering firms have experienced more passive "support" with little in the way of tangible input. There is a strong perception that some LECs are geared in reality only to the SME sector. It is reported that there is a close correlation between the enterprise and leadership skills of the senior LEC executives and the quality of support on offer. | ||||
| Large engineering businesses (over 500 employees) report that they have gained more assistance directly from Scottish Enterprise. It has also been reported that a sense of isolation has been engendered amongst medium sized companies (250-499 employees) where a perception has been created that they have somehow fallen through the net. | ||||
| The Pathfinder Group advocates that those excellent examples of LEC support for the engineering industry should be replicated in the under-performing areas. | ||||
| Even experienced industrialists have encountered difficulties attributable to confusion between support services from LECs and Local Authority provision. Evidence exists of duplication between various publicly funded providers in supporting economic development and there is therefore a case for examining the situation with the aim of streamlining and clarifying the support available. | ||||
| In the context of exports, the Pathfinder Group for Engineering notes that Scottish Trade International performs effectively and should be encouraged to pursue its high profile role in selling "Scotland the Brand" world wide. | ||||
| In similar vein, the Scottish Mechanical Engineering Spend Survey indicates that there is considerable scope to develop sourcing within Scotland. | ||||
| The Pathfinder Group is supportive of initiatives being taken by the LECs in West Central Scotland to bolster sales sourced in Scotland. | ||||
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| Sustaining Scottish Industry | ||||
| The engineering industry in Scotland exports approximately 60% of its product of which around half is sold to the European Union (4). There is of course significant pressure on our exporters stemming from the much publicised effect of the value of Sterling and manufacturing exports have fallen by 14% during the year to the 3rd quarter of 1998 (5). | ||||
| It is vitally important to the prosperity of the engineering industry in Scotland that it is not placed at a disadvantage relative to its competitors in England and Wales, nor indeed that disparities are created across Local Authority boundaries. The Pathfinder Group would therefore welcome an early commitment from the Scottish Parliament that Scottish engineering businesses will not be targeted as a source of revenue generation through increases in business rating and that uniformity should be underpinned by the Parliament retaining control in this area. | ||||
| Furthermore, the Pathfinder Group is keen to ensure that the Scottish Parliament avoids taking steps which could create a perception that Scotland is exposed to a regime of high taxation. The Group believes that such a perception would mitigate against attracting and retaining manufacturers of the calibre we require and put additional pressure on payroll costs and adversely affect Scotland's competitive position in world markets. | ||||
| Scottish engineering companies know from experience that legislation which adds unnecessary burdens or fails to take into account the competitive forces outside the UK results in fewer employment opportunities. What is needed are employers, employees and legislators who understand the forces unleashed by globalisation and who are prepared to work together to adapt to a perpetually evolving competitive environment. | ||||
| The Pathfinder Group calls for a stringent approach to assessing the impact of proposed legislation on businesses and where appropriate a periodic "jobs impact audit". The Scottish Parliament's role should evolve into one in which it seeks to promote best practice, and a jobs impact audit approach to new legislation would be seen as an appropriate step in this direction. | ||||
| Transport | ||||
| The Pathfinder Group for Engineering is aware of the publication by the DETR (Department of Environment, Transport and the Regions) of its consultation paper "Breaking the Logjam" and the proposals for separate consultations by The Scottish Office addressing similar issues in Scotland. The Group believes that Scottish companies need to work hard to minimise the disadvantage resulting from their geographical position relative to European markets. This is of particular importance for the transportation of both raw materials and finished goods. The Group believes that the gaps in Scotland's road transport infrastructure ought to be addressed by the Parliament. There is an urgent need to upgrade Scotland's road links to England to motorway standard and to complete works such as the M8, M74 northern extension and dualling of the A1. It is difficult for a vibrant economy to prosper with deficiencies in its transport links. The Group believes that in the event of road charging, it is essential that revenues are put exclusively towards strategic enhancement of the road network. | ||||
| Moreover, it has to be recognised that realistic alternatives to road transportation may not currently be available in some areas. The Pathfinder Group for Engineering believes that the industry must make the best use of available transport facilities and finds itself in step with the basic aims and objectives for an integrated transport policy set out in the White Paper (6). The Group would welcome an examination of the advantages and disadvantages relative to cost of developing Scotland's capability to transport goods by rail, including opportunities presented by the channel tunnel. The Group believes this would take cognisance of The Scottish Office vision where "freight movements are efficient and environmentally clean, with a reduced dependency on road freight, particularly for longer journeys" (7). The Group believes that opportunities may exist for more use of containerised transport by rail, given a level of co-operation between businesses and access to railheads. It may be that lessons could be learned from the success of rail transport elsewhere but equally a significant number of engineering products may be unsuitable for conveyance by rail. The Pathfinder Group looks forward to specific proposals to address these issues emerging from discussions in due course between the Strategic Rail Authority and the Scottish Executive. | ||||
| Sustainable Development | ||||
| Engineering companies in Scotland are working to make their production methods more environmentally friendly, recognising that the efficient use of raw materials and energy, minimisation of waste, and the encouragement of clean technology not only promote sustainable development but also reduce costs and therefore enhance competitiveness. A new wave of technologies to meet higher environmental standards can present an important opportunity for job creation. | ||||
| Increasingly environmental standards are being agreed globally rather than at national level. Consumers, the Scottish Parliament, the engineering industry and others need to work together to meet these international targets such as those agreed at the Kyoto summit. The Pathfinder Group believes that the engineering industry in Scotland can lead the way in improving the sustainability of its processes. More specifically, they would welcome: | ||||
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| Being a relatively small economy, opportunities exist to pool our strengths and capitalise on opportunities to generate higher value added product development. The range of engineering diversity and the proximity of engineering plants in Scotland provide an ideal opportunity for a number of engineering businesses in Scotland to combine their endeavours and become more innovative with environmental projects in mind. In particular "clusters" could be formed and appropriate funding offered to encourage specialisation and capitalise on linkages in environmental engineering. | ||||
| The success of a cluster approach, where clear market opportunities are identified, will firmly root the value-adders into the Scottish economy, focusing on technological progress with appropriate R&D foundations. | ||||
| Input to the Scottish Parliament | ||||
| The Pathfinder Group applauds the inclusive approach which the Scottish Parliament intends to take in developing legislation. The Group particularly welcomes the proposal in the Report of the Consultative Steering Group to include experts (in a non-voting capacity) in the Parliament's Committee structure and believes that the engineering industry can make a significant contribution to policy formation. | ||||
| The Group would also welcome initiatives to ensure that members of the Scottish Parliament are given the opportunity to be updated on the requirements of a successful Scottish engineering industry in order that knowledge and understanding of the industry can be brought to bear in the Parliament's deliberations. With that in mind, Scottish Engineering has offered to assist in this process. | ||||
| The Group would anticipate that the Scottish Parliament will contribute to the various discussions regarding the UK's likely introduction to the Euro and bear in mind the possible implications for industry. The Scottish engineering industry will be prepared to provide appropriate input to the discussions at that time. | ||||
| Input to Europe and Westminster | ||||
| The Pathfinder Group for Engineering supports the plan for the Scottish Parliament to have a representative office in Brussels, particularly if it develops a campaigning influence on Scotland's behalf. The Pathfinder Group believes that such a representative presence could give a platform to raise concerns about the damaging excesses of European legislation affecting Scotland's engineering businesses, especially to try to encourage the European Commission to adopt positive policies to allow Scotland to compete successfully in world markets. | ||||
| Moreover, the Scottish Parliament can consolidate the views of industry for input to Westminster, further reinforcing the voice of engineering currently channelled from Scotland via the Engineering Employers' Federation. | ||||
| Provision of National Statistics | ||||
| Despite being one of the most important measures of economic activity, figures available on Gross Domestic Product per head are currently only available to 1996. The most up to date figures for manufacturing labour productivity measured by Gross Value Added per head are only provisional for 1997. | ||||
| By way of example, figures from the ONS Annual Census of Production (reproduced below) show that Scotland's manufacturers lagged slightly behind the UK average for "Gross Value Added per head", the provisional figure for Scotland having declined between 1996 and 1997. It would be helpful to have accurate, more up to date, information to help guide our parliamentarians and industrialists in their quest to achieve significant improvements in Scotland's overall manufacturing competitive performance. | ||||
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| Source: DTI | ||||
| Summary of Key Points | ||||
| Lifelong Learning | ||||
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| Inward and Indigenous Investment | ||||
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| Sustaining Scottish Industry | ||||
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| Transport | ||||
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| Sustainable Development | ||||
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| Input to Europe and Westminster | ||||
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| Provision of National Statistics | ||||
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| Recommendations | ||||
| Lifelong Learning | ||||
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| Local Enterprise Companies | ||||
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| Transport | ||||
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| Input to the Scottish Parliament | ||||
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| APPENDIX 1 | ||||
| Pathfinder Group for Engineering | ||||
| Peter T Hughes (Chairman) OBE FEng Chief Executive, Scottish Engineering Systems Ltd | Alan T Wright Vice President Control Components Europe Honeywell Control | |||
| John K Frew Deputy Managing Director Weir Pumps Ltd | Gerald S Cairns Director Renfrew Operation Mitsui Babcock Energy Ltd | |||
| Dr David L Seager Director Lewis C Grant Ltd | Christopher J Packard President Kvaerner Energy Ltd | |||
| Robert S Byers Group General Manager Walker MacLeod Group | Edward J P Smith (Administrator) Head of Finance And Administration Scottish Engineering | |||
| Ian M McCreery Managing Director Howden Compressors Ltd | ||||
| APPENDIX 2 | ||||
| Scottish Engineering | ||||
| Scottish Engineering is the leading sectoral support body for the engineering industry in Scotland. The organisation currently represents 370 member companies employing approximately 70,000 people. Scottish Engineering estimates that employment levels across its membership and potential members account for 120,000 employees. The engineering industry is the largest main sector within manufacturing and is long established as a prime mover for the rest of the Scottish economy. A recent survey indicates that 75% of Scottish engineering companies have been established for more than 10 years, compared with a figure of 67% for the UK as a whole. Scottish Engineering member companies are involved in key manufacturing sectors including mechanical equipment, metal products, electronics, oil and gas and power generation. Whilst Scottish Engineering operates as a free standing organisation, controlled via a board of senior executives drawn from its member companies, it is also a key part of the London based Engineering Employers' Federation (EEF) and plays a significant role in EEF initiatives, including input to Westminster and Brussels. | ||||
| APPENDIX 3 | ||||
| Company Consultation | ||||
| Scottish Engineering District meetings | ||||
| District | Location | Date | ||
| Borders | Buccleuch Arms Hotel, St Boswells | Monday 15 February | ||
| Edinburgh | Sun Microsystems, Linlithgow | Tuesday 16 February | ||
| Lanarkshire | Silvertrees Hotel, Bothwell | Thursday 18 February | ||
| Aberdeen | Tree Tops Hotel, Aberdeen | Monday 22 February | ||
| Fife | Pfaudler-Balfour, Leven | Tuesday 23 February | ||
| Dundee | Invercarse Hotel, Dundee | Wednesday 24 February | ||
| Strathclyde West | Hoover, Cambuslang | Thursday 25 February | ||
| (1) Scottish Engineering Quarterly
Review (2) EMTA (Engineering and Marine Training Authority) 1998 Labour Market Survey for the Engineering Industry, Report for Scotland issued January 1999. (3) COSHEP (Committee of Scottish Higher Education Principals) Survey Report, Engineering Provision in Scottish Higher Education Institution, December 1998. (4) Engineering Employers' Federation Annual Review 1997/98 and Scottish Council Development and Industry Survey of Manufacturing and Exports 1997/98. (5) Scottish Council Development and industry Indicator February/March 1999. (6) Travel Choices for Scotland, Chapter 1.3, page 13. (7) Travel Choices for Scotland, Chapter 3.4.1, pages 29/30 |
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