RACHEL DAVIES LEP Board Member And Principal – Somerset College

1. The Employment and Skills Partnership and Heart of the South West Local Enterprise Partnership Supporting Manufacturing in the Heart of the South West RACHEL DAVIES LEP Board Member And Principal – Somerset College

2. The outlook for manufacturing and the economy Lee Hopley EEF Chief Economist

3. OVERVIEW • Manufacturing sees decent start to recovery. • But outlook becoming more mixed across the sector. • Companies planning to invest and recruit, but confidence has begun to slide. • Wider UK economic outlook much more uncertain. • A raft of external factors raising the risks to growth. • 2012???? • Any reasons to take a glass-half-full view of manufacturing?

4. CURRENT CONDITIONS Manufacturing growth outpaces wider economy and drives export-led recovery

5. Data revisions provide new info on recession and recovery, % change in output MANUFACTURING GDP Source: National Statistics

6. Q3 GDP brings a little relief,% quarter on quarter change Source: National Statistics

7. Manufacturing still growing,% balance of change in past three months Source: EEF Business Trends Survey

8. Exports drive manufacturing orders,% balance of change in orders in past three months Source: EEF Business Trends Survey

9. Non-EU economies provide a boost,goods exports by destination, 2008q1 = 100 Source: National Statistics

10. ..but these markets still not on the agenda for some, % of companies with involvement in emerging markets Source: EEF Export Survey

11. Sector differences becoming more marked,% balance of change in output in past three months Source: EEF Business Trends Survey

12. Recruitment plans ease,% balance of change in employment Source: EEF Business Trends Survey

13. SMEs more cautious in forecasting growth,% balance of change in orders in next three months Source: EEF Business Trends Survey

14. Manufacturing growth to continue,% annual change in output Source: EEF

15. RISKS, CHALLENGES AND OPPORTUNITIES Where will the global economy go from here?

16. Downside risks … and more of them • government spending cuts; • deteriorating labour market prospects; • access to finance; • other lingering UK business environment concerns; • disorderly eurozone debt default; • weaker outlook for US economy; • emerging markets must navigate soft landing.

17. UK outlook more challenging  Investment outlook – Investment intentions not translating into increased capex. Credit cost remains elevates and BoE credit conditions suggests worsening in Q4. Labour market – Labour market prospects look very weak; claimant count is rising, and outflows have fallen. Proportion of temporary workers wanting permanent job growing.  Consumer – Confidence is shaky, indictors heading towards 2009 lows. Economic situation weighing on consumers, household belt-tightening set to continue.

18. Softening across the board,index of activity, 50 = no change Source: Markit Economics and ISM

19. GOOD Greek political wrangling – an end in sight? US Q3 better than expected. US manufacturing activity still positive Emerging market engine not spluttering yet. Commodity prices should head lower. Monetary authorities still have a bit of fire power. BAD European activity indicators signal contraction. German output sees consecutive monthly falls. Business confidence across ez tumbles. US consumers aren’t too cheery either. US labour market conditions have deteriorated. Global outlook….The good, the bad and the ugly UGLY • ITALY?

20. Where will we go from here?% annual change in GDP Source: Oxford Economics

21. But opportunities in new markets remains,% of UK exports and % annual GDP growth, 2010 • Scope for greater in-roads into emerging markets • Societal and environmental challenges also bring new market potential • Scope for greater gains through collaboration • Re-thinking sourcing and supply chain management – everything to gain? Source: National Statistics and Oxford Economics

22. A wider range of innovations,% of companies introducing innovation in past three years • Strategies focus on value-addition and new market entry. • Competition on the basis of research and design. • Innovation across all activities a growing priority. • Global look at locations of activities. But innovation/production link not easily severed. • Service provision provides revenue potential – and cushion in difficult times. Source: EEF Innovation Monitor

23. Conclusion • A more challenging period • The recovery in the economy and manufacturing has entered a more challenging period since the start of the year growth flat in H1. • A more uncertain environment • Diving consumer confidence, euro-shakes, US wobbles and spreading global growth concerns – all increasing sources of uncertainty • But still a more sustainable platform for growth • Over the longer term, growth founded on higher investment and net exports offers a more sustainable platform for growth. Manufacturing is at the heart of this.

24. The Employment and Skills Partnership and Heart of the South West Local Enterprise Partnership Supporting Manufacturing in the Heart of the South West BEN NEILD Assistant Director – Marchmont Observatory and SLIM

25. Manufacturing in the Heart of the South WestEmployment & Skills Issues14th November 2011Ben NeildAssistant Director, SLIM

26. PresentationContents Overview of manufacturing in the Heart of the South West Five issues for discussion during the workshop Product Innovation Business Support and Planning Higher level skills & graduates Workforce skills Leadership & Management Source: ONS

27. Manufacturing in HoSW In 2009, UK manufacturing sector generated some £140 billion in GVA. However, between 1990 to 2009, manufacturing’s contribution to UK GDP has fallen from 22% to just over 11%. • This fall has been faster in the UK than in many other industrialised nations. • Due to factors like: • off-shoring • out-sourcing • falling prices Manufacturing as a % of GVA in leading industrial countries, 1990-2009 Source: UNCTAD

28. Manufacturing in HoSW Locally, the decline in manufacturing GVA follows the national trend, declining from 20.5% in 1998 to 12.8% in 2009. Share of Total GVA accounted for by Manufacturing (%), 1998 - 2009 Source: LFS

29. Manufacturing in HoSW There were approx 67,200 manufacturing employees in HoSW in 2010 Equivalent to 10.2% of total employment in HoSW (8.8% nationally). • Variations within HoSW are significant. • 4.2% in Torbay • 13.2% in Somerset • Lower than average prevalence of high-tech. More medium-high tech and low-tech. Source: BRES

30. Manufacturing in HoSW Although there are areas of high productivity, overall manufacturing output per full time employee (FTE) is significantly lower in HoSW than it is across GB as a whole. Productivity per FTE, Manufacturing sub-sectors, HoSW & GB, 2009 Between 1998 and 2009 manufacturing productivity in HoSW rose by 34%. Nationally it rose by 58% in the same period. Source: SW Regional Accounts

31. Manufacturing in HoSW Manufacturing Businesses by sizeband, 2009 Source: SW Regional Accounts

32. Product InnovationPolicy • Supporting particular industries / sectors was anathema to Mrs Thatcher. Things changed little under Labour, until the recession, the collapse of financial services, the call for ‘rebalancing’ and a new ‘industrial activism’. • This activism focused on ‘new’ industries that would support jobs growth post recession – New Industries / New Jobs. • This has resulted in a range of small scale initiatives. Examples include: • Technology and Innovation Centres (TIC) – ‘will draw on excellent university research to accelerate the commercialisation of new and emerging manufacturing technologies’ • EPSRC funded centres for Innovative Manufacturing to‘combine inventive research and business acumen to develop the sorts of innovative ideas taken forward to commercialisation through TICs’ • Manufacturing Fellowships - Providing exceptional engineers from business to lead a £1 million programme of research within HEIs Source: Going for Growth – Treasury / BIS

33. Product InnovationHotSW Strengths Plymouth University - 'the enterprise university’ offering help to businesses in entrepreneurship, research, knowledge transfer. Completing a £19m marine facility w/ state-of-the-art research facilities, including the most advanced wave tank and testing facilities in the country. University of Exeter– investing £230m in a science strategy w/ 5 themes, including: Climate Change, Systems biology & Functional materials. Investing £2.6 million Centre for Additive Layer Manufacturing (CALM) to help businesses, entrepreneurs develop prototypes. Also offer Knowledge Transfer Partnerships, joint EU research proposals Further Education - e.g. Petroc’s ‘Business Innovation Service’ / South Devon College ‘Innovation Escalator’ etc Source: LFS

34. Business Support A complex and quite crowded landscape, involving providers that are: • National / Government backed • Business Link • MAS / SW MAS • UKTI • Sector focused • EEF • Membership based • FSB / CBI • Institutionally based • University Plymouth’s ‘Enterprise Solutions’ • South Devon College’s ‘Business Advantage’ • ‘Local’ • North Devon Plus • Torbay Development Agency The emphasis, with the disbanding of Business Link, is on LEPs and Local Authorities taking increasing responsibility for ensuring business support meets local business needs.

35. Planning • A ‘presumption in favour of sustainable development’ • Increasingly localised decision making • Retention of growth in business rates • Enterprise Zones • Highly contested area, with tensions between ‘development’ and ‘environment’. • Role of the LEP, as a voice for the business community. • Already used, in relation to support for the South Devon Link Road Source: LFS

36. Higher Level Skills Employment in manufacturing is becoming more skills intensive. Employment by Occupation (% of employment), SEMTA, SW, 1987 & 2017 Source: Working Futures

37. Higher Level Skills • ‘Access to a skilled workforce, particularly science, technology, engineering and maths (STEM) skills, is vital for the sector'. • Plan for Growth, BIS / HM Treasury • Exeter and Plymouth universities provide c.30% of all STEM provision in the South West - over 20,000 students in total. • 50% of all Plymouth & 40% of Exeter students were studying STEM subjects in 2009/10. • Since 2002/03, the number of STEM students at the two universities has risen by around 18%, faster than either regional or national growth. • The proportion of all students studying STEM subjects at Exeter has risen v. rapidly, from 26% in 2002/03 to its current level of 40.1%. Source: LFS

38. Higher Levels Skills In 2008-09, nearly 43% per cent of first degree graduates from UK HEIs were in STEM-related subjects. However, of these graduates, less than 5% entered employment in the manufacturing sector, despite average wages in engineering comparing favourably to other professions. Plan for Growth, BIS / HM Treasury Nearly a quarter of UK engineering graduates are working in non-graduate jobs or unskilled work such as waiting and shop work. 46% of 2009 engineering graduates were in jobs directly related to their degree subject six months after leaving university. Prof Emma Smith, Uni Birmingham Source: LFS

39. Higher Level Skills • So how do we make better use of these skills? • Graduate Internships • Knowledge Transfer Partnerships • Student Business Partnerships Source: LFS

40. Workforce Skills The manufacturing workforce is gradually becoming more highly qualified. Manufacturing Employees by Qualification Level, South West, 2006 & 2011 Source: LFS

41. Workforce Skills But…. it remains less well qualified than the workforce as a whole Employees by Qualification Level, Manufacturing vs All, South West, 2011 Source: LFS

42. Workforce Skills Skills-shortage-vacancies (vacancies that employers cannot fill because applicants lack the right skills) are uncommon - less that 0.2% of total employment. Skills gaps (where staff are not being fully proficient in their current job) are common – reported by 20% of employers and as affecting 200,000 employees nationally. Skills missing are most commonly practical / technical & job-specific. Team-working and communication skills are also cited. They are most prevalent in Skilled Trades and among machine operatives. They can have significant impacts – e.g. increase in the workload for others (51% of employers); increased operating costs (37%); difficulties w/ quality standards (24%). But (good news) 70% say they are due to people lacking experience and / or having been recently recruited. Points to issues around recruitment, induction and initial VET – rationale for Apprenticeships etc. Source: NESS 2009

43. Leadership &Management Skills Are generally acknowledged to be critical to the success of all enterprises. However…. managers are also identified as the occupational group where the need to upskill was greatest. “There remain situations where “cheap labour and a shortage of capital to invest in automation sees workers taking items off one belt and placing them on an adjacent conveyor system all day long”. Training individuals in these roles is unlikely to impact on the profitability, growth or survival, unless accompanied by a review of “work organisation, job design, how employment relationships are managed and conditions are achieved whereby employee motivation, commitment, and discretionary effort are maximised”’. Keep, Mayhew & Payne, From Skills revolution to productivity miracle – not as easy as it sounds? cited in B. Neild, Training and business survival during recession, SLIM, Nov 2008. Source: LFS

44. The Employment and Skills Partnership and Heart of the South West Local Enterprise Partnership Supporting Manufacturing in the Heart of the South West TIM JONES HoTSW LEP CHAIRMAN

45. The Employment and Skills Partnership and Heart of the South West Local Enterprise Partnership Supporting Manufacturing in the Heart of the South West

46. AgustaWestland Ltd – At the heart of Advanced Manufacturing in the UK

47. AgustaWestland Ltd – Investing in all our futures • OUR TECHNOLOGY: • World leaders in: • advanced rotor systems • Transmission/Gearbox Design and manufacture • Optimal matching of engine, rotors and transmissions • Active Vibration management/control systems • £30m investment in Research and innovation in 2011 • Strategic relationships with 15 UK Universities • 45 Live R and D programmes OUR SUPPLIERS: • 80% of value-added is bought out • £750m annual spend with UK Suppliers • 845 UK Suppliers • 650 UK SMEs • Over 300 suppliers in the South West • OUR PEOPLE : • 3000+ employees living in the South Somerset Area • 35% at Graduate or above level • 5% in full-time education or training (175 full time trainees and apprentices) • 60 young people sponsored through further education each year • 9 MSc sponsorships in 2011 • Working with 29 local schools on STEM and Imagineering • 75 local schoolchildren through work experience every year • 1st Industrial organisation to receive “Oustanding” rating from Ofsted. • OUR CUSTOMERS: • 60 Years experience of helicopter design, development and manufacture • Over 1100 Helicopters in service with 40 Customers around the world • UK MoD remains our major customer: • Ca 70% of current business • £800m projected revenue for 2011 • Outstanding orderbook of 2.3Bn

48. Today’s Business Environment • Public Sector Spending Cuts • Advanced Manufacturing Growth Strategy • EU Procurement Directives and State Aid • Skills and Training/Education

49. My LEP agenda • Advanced Manufacturing Growth Strategy – Time is money • Access to Finance • Connectivity and Infrastructure Links • Support for Exports – Nationally and Internationally • Public Sector Procurement – Price versus value – Time is money • Skills and Personal Competencies • Bureaucracy – Time is money

50. The Employment and Skills Partnership and Heart of the South West Local Enterprise Partnership Supporting Manufacturing in the Heart of the South West NICK AMES LEP Board Member And Managing Director - Supacat