Lord Chidgey
Main Page: Lord Chidgey (Liberal Democrat - Life peer)
Lord Chidgey (LD)
My Lords, listening to the noble Lord, Lord Whitty, I started to reflect that I spent the first 30 years of my working life as a professional engineer and the next 20 as a professional politician. I am not sure whether that was upskilling, reskilling or, as some might consider, downskilling. I hope that it was not the latter.
I congratulate the noble Baroness, Lady Wilcox, on bringing this debate to us, and wish to pick up on something she said about the Markit/CIPS purchasing managers index survey. It is important because, according to the media, it is a constantly watched figure. The index for June was 57.5, compared to 57.0 for May—a clear indication that the economy is continuing to move in the right direction. Despite this, there remain issues of potential concern. Despite considerable effort by the Government, manufacturing exports are still failing to grow at a proportionally acceptable level. The United Kingdom is also importing far too much of what we consume. The UK’s seasonally adjusted trade deficit in goods was £8.9 billion in April compared with £8.2 billion in March—roughly double what it was for the same period in 2012.
A reading above 50 on the Markit index indicates that manufacturing is expanding and playing its part in the 0.8% growth in the economy registered in the first quarter of this year. We can be reasonably confident that the following few months, allowing for holidays, will show good manufacturing figures, due to an increase in exports, unlike in the eurozone—which, as far as I know, has not been mentioned—where the Markit index has fallen to 51.8, compared with the UK’s 57.5. That is a remarkable difference.
By the time I entered Parliament in 1994 and became employment spokesman, manufacturing’s share of the UK’s economic output had halved, from around 40% post war to less than 20%, with over 1 million skilled workers out of work for more than a year. The noble Lord, Lord Monks, will remember that when he was secretary-general of the TUC and I came to chat to him in his office about the national minimum wage, these were the issues that we had to cope with back in the early 1990s.
Today, manufacturing represents some 11% of the UK’s output, but this further fall is in part due to much stronger gains in the service sector. Nevertheless, contrary to common belief, UK manufacturing is strong. According to the trade magazine, The Manufacturer, the UK is currently the 11th largest manufacturing nation in the world, accounting for 11% of the UK’s gross value added and 54% of UK exports, and employs directly 2.6 million people.
In the global aerospace manufacturing industry, the UK ranks second in the world. The automotive industry exported a record-breaking 84% of the 1.6 million vehicles manufactured in 2011. The chemicals and pharmaceutical industries add £20 million every day to the balance of trade. Most importantly, underpinning these achievements is an average annual productivity increase of 3.4%—two-and-a-half times greater than the UK economy as a whole.
Manufacturing dominates the UK’s research and development spending. In 2012, that spending totalled £12.2 billion. R&D spending in the services sectors totalled only £4.3 billion, despite these sectors accounting for 79% of our economic output. BIS and the Government Office for Science report that over the next 20 years we will have an increasing dependence on high-skill workers. In response to that assessment let me turn to the fourth report of the Institution of Mechanical Engineers, of which many years ago I became a graduate and associate member. The report, entitled Engineered in Britain, points out that the UK needs to double the number of engineers entering the profession each year between now and 2020 to meet economic demand and to counter the increasing number of engineers retiring. This is a result of the baby boomers. To achieve this, we will need to increase annual engineering graduate output from the current level of some 46,000 to 87,000.
The number of qualified apprentices needs to increase from 27,000 to 69,000 over the same period. These apprentices should not be confused with the 1.8 million that the coalition Government, inspired by the Lib Dems, have played a major part in creating. Although playing an essential role in helping to upskill the general workforce, the 1.8 million apprentices should not be compared with the highly skilled engineering apprenticeships, which lead to highly qualified technicians.
Efforts to increase the number of entrants into science, technology, engineering and maths—the STEM subjects and STEM-based professions—by government and industry have improved recently, especially when they include engineering apprenticeship. There is, however, a lack of co-ordinated action between all parties at all levels to address the problems. I listened with great interest to my noble friend Lord Young’s comments and look forward to his report. From what he said, I think that it covers this aspect.
A key area of concern raised by the Institution of Mechanical Engineers is that we are not recruiting more entrants into the ranks of technicians and engineers because of a lack of high-quality careers advice. There are insufficient connections between schools and local industry to educate and inform students of the range of career opportunities available to those who study STEM subjects. I heard the most appalling tale a few weeks ago about a bright young lad who wanted not just to study engineering but to become an engineer. His teacher told him, “No, you are far too bright to do engineering”. I am speechless. I am presently trying to find internships for high-end A-level students—boys and girls, interestingly—looking for gap-year placements in industry before taking up offers of places at Oxford, Cambridge and other main universities to read engineering.
Without a future pipeline of skilled engineers and technicians, manufacturers will need either to import the required talent or export their facilities to countries where engineers are in supply. It is vital that schools and local industry collaborate to inform students of the opportunities, qualifications and skills required to enter STEM professions. I very much take the point made by the noble Lord, Lord Jenkin.