The Economy

Lord Mair Excerpts

Thursday 28th April 2016 Lords Chamber

[Lord Mair (CB)]

My Lords, I fully support the points made by the noble Lord, Lord Bhattacharyya, a fellow engineer, relating to investment in innovation and industries.

If we want to build a stronger economy, we cannot ignore the vital role of engineering innovation and the problem of the growing engineering skills crisis. Engineering impacts all our lives in many ways. It accounts for at least 20% of gross value added for the UK economy, and some estimates are significantly higher. Manufactured goods account for 50% of UK exports. Science, engineering and technology underpin the whole economy—everything from power generation and electricity distribution to utilities, the food chain and healthcare, as well as, of course, transport and our information and communications infrastructure.

Successful engineering is underpinned by innovation. This is one of those now rather overused words and I want to be clear as to what it means. It is the process by which new ideas generate economic value in the form of new and improved products and services—so it is a crucial contributor to growth and productivity. The capability and capacity to innovate is the key to prosperity in the 21st century. Without innovation, economies and companies stagnate and become increasingly unable to cope and to compete with those that invest in and adopt new ways of doing things. To build a stronger economy, we must therefore invest in innovation to secure our future growth.

The Government have a key role to play in promoting private sector investment and encouraging innovation in priority or high-potential areas. This is the approach of many, if not all, of our competitors. Public and private research and development investment in the UK in science and technology accounts for 1.7% of GDP. This compares with Germany, which invests 3% of GDP. The UK remains 12th among the 28 member states of Europe for R&D investment. Of all the G7 countries, we have the lowest levels of government-financed investment in R&D as a percentage of GDP. This is despite many of our universities being the leaders in Europe, and indeed the world. If UK R&D investment in science and technology were increased to the level in Germany—that is, 3% of GDP—the benefits to the economy would be huge.

As mentioned by the noble Lord, Lord Bhattacharyya, Innovate UK—formerly the Technology Strategy Board, established by the Government in 2007—is the UK’s innovation agency. Its aim is to fund, support and connect innovation businesses to accelerate sustainable economic growth. Innovate UK’s schemes show substantial leverage, with an average of £6 returned to the economy in gross value added for every £1 invested. The Government should continue to ensure that Innovate UK is well funded so that R&D investment and engineering innovation can flourish.

A prerequisite for engineering innovation is a skilled workforce. The UK is facing a well-documented engineering skills crisis. An ageing workforce means that hundreds of thousands of skilled technician and professional engineering roles will need to be replaced over the next 10 years. Analysis by EngineeringUK projects a shortage in the region of 70,000 advanced technicians and engineers each year for the next 10 years. So in 10 years’ time we will have a cumulative shortage of 700,000. That is seriously worrying.

To illustrate the situation, of the 600,000 pupils who pass through the education system each year, only around 30,000 progress to study A-level physics. That is a 95% fall across one single transition point.

Why is this happening? There is a range of factors: poor perceptions and lack of interest in engineering jobs; chronic shortages of specialist teachers in physics, mathematics, computing, and design and technology subjects; and low attainment and progression in STEM subjects at school—science, technology, engineering and mathematics—exacerbated at the further education and higher education stages. Not enough young people are making engineering their career choice. At university level, it is a victim of its own transferable skill, so that engineering talent is being lost to other professions, such as accountancy or management consultancy. All too often at Cambridge, very bright engineering students who are about to graduate tell me that they are going into finance and the City—great for the City; bad for engineering.

Engineering also suffers from significant under- representation of women and people from minority ethnic groups. The proportion of women engineering undergraduates at Cambridge is 25%—which is unusually high but still not high enough compared with the proportion for medicine and law—but women make up just 6% of the overall UK engineering community: a disturbingly low number.

So what should we do? There has been no shortage of attempts to attract young people into engineering, but they have been, on the whole, small-scale interventions. We need a huge gear shift in the steps we take to secure engineering talent if we are to meet the current and future needs of business and employers. There are some exciting developments. For example, there is the Engineering Talent Project, developed and run by the Royal Academy of Engineering and backed by major engineering organisations. It is designed to bring a single, co-ordinated response to the skills challenge and to communicate the breadth of opportunity inherent in a career in engineering. This is a five-year programme of awareness-raising, engagement and careers information designed to bring about informed decision-making by secondary school children as they make their subject choices at critical junctures in their school career. The aim is that engineering should no longer be the present yet invisible profession. It will have visibility. Its contribution to the built and made environment will be widely understood and it will have a clear presence within the suite of options for young people considering what they want from their working life. With sufficient weight behind it, and the voice of employers at its heart, it stands to make a real impact on the quality and quantity of young people going into technical and engineering jobs.

Government must have a critical role in such a programme. Real change will be achieved only by co-ordination between government, employers and the engineering institutions. The urge for a co-ordinated approach on engineering has been a cri de coeur from industry for some time. There is now a real opportunity for government to play a part.

[Lord Judd (Lab)]

The noble Lord is making a formidable case, which I think would find a great deal of support on this side of the House. But does he not agree that if all this is to be successful, in pleading with the Government to put vastly more resources into what he advocates, it is essential that they put investment on the same scale into social infrastructure to make sure that the communities in which most of the new immigrants will be living have the right kind of health services, schooling, housing and the rest? Otherwise, there will be—unfortunately and inevitably—crises and tensions.

[Lord Mair]

I thank the noble Lord for that point.

The Secretary of State for Transport plans to make 2018 the Year of the Engineer to excite a new generation to follow Brunel, Stevenson and Telford, along with Bill Gates, Steve Jobs and Tim Berners-Lee. I urge that he work with major engineering employer organisations, the Royal Academy of Engineering and other engineering institutions to ensure that this is not a missed opportunity. The engineering skills crisis will not, of course, be solved by a loud noise over the course of a single year but by a real co-ordination of voices, messages and resources. These must highlight, rightly, the triumph of engineering in major projects such as Crossrail. But they must also point to the diversity of engineering opportunities and make it clear, relevant and, above all, exciting and attractive.

Engineering is indeed very exciting and attractive. The challenges facing our society are enormous and pressing. How and where will we provide infrastructure as resources become scarcer and energy more expensive? What will the energy mix look like in 10 years’ time? How might exciting new technologies such as tidal lagoon power and advances in battery storage influence this? What will future cities look like in the coming decades? Will car ownership disappear with the likely arrival of autonomous vehicles? The world is changing very rapidly and it is therefore vital for the economy to have a high level of UK R&D investment in science and engineering. The UK must continue to be world-leading in engineering innovation. We cannot afford to slip behind.

To conclude, our economy simply will not thrive if our industries fail to recruit the young men and women engineers who are needed for them to grow. Without them we will not innovate—and without innovation we will lose out to global competition. Government has a vital role in ensuring that this does not happen. I hope that it will take the necessary steps so that we can properly build a stronger economy.