Select Committee on Trade and Industry Minutes of Evidence


Memorandum by Amicus-AEEU

1.  INTRODUCTION

  Amicus-AEEU has over one million members principally employed in manufacturing as well as construction, power generation, utilities and servicing. It has pioneered the partnership approach, advocating that both management and workforce share responsibility for ensuring the success of the enterprise and for facing up to business challenges. The AEEU was formed out of a merger of two unions the EETPU and the AEU and merged with sister union MSF on 1 January 2002 to form a new super union, Amicus.

EETPU

  The EETPU was born out of the earlier merger of two unions, the ETU (electricians) and the PTU (plumbers). In 1971, EESA (Electrical and Engineering Staff Association) was created as the white collar section of the Union. By 1989, a number of other professional associations had joined the Union and reorganised themselves under the umbrella organisation, the Federation of Professional Associations.

AEU

  1852 saw the birth of the Amalgamated Society of Engineers (ASE), which by the turn of the century had nearly 90,000 members. In 1899 work started on a head office in Peckham, south London, which remained the headquarters until the merger with the EETPU in 1992.

  In July 1920 the ASE and nine other unions merged to form the Amalgamated Engineering Union. In 1967 foundry workers joined the AEEU, followed by the draughtsmen and construction engineers. In 1971 the federation became known as the Amalgamated Union of Engineering Workers.

2.  THE CASE FOR MANUFACTURING

  We firmly believe that there is a strong case for manufacturing and for ensuring its future through improved productivity and greater competitiveness. Although manufacturing industry has suffered a massive decline in the UK (since 1950, there are five million fewer manufacturing jobs compared with an extra eight million in services), the strength of the sector is still fundamental to the health of the economy as a whole.

  There is no doubt that service sector cannot alone fill the UK's increasing trade gap. We must ensure that manufacturing is recognised as a significant wealth creator. Although it makes up just over 20 per cent of GDP, it accounts for 60 per cent of exports. Economists estimate that there is an "employment effect" of 2.5, ie for every job lost in manufacturing, 2.5 service sector jobs are hit as well. There has been evidence of this recently as the recession in manufacturing spreads into the service sector. The following submission highlights areas that we feel need to be addressed and also gives practical examples of workplace initiatives that have improved productivity.

3.  THE CURRENT SITUATION

  We have used the example of aerospace, as an industry hit hard by the events of 11 September, to highlight some of the problems faced and possible solutions to these problems. Amicus is the largest trade union in the Aerospace industry and hence a major stakeholder. The Society of British Aerospace Companies (SBAC) and Amicus have a history of working together for the benefit of the industry. Last year we commissioned a report looking at the long-term future of the Aerospace Industry.

  This study "World Class—A Blueprint for the Future of the Aerospace Industry" was well received by the Government. The report highlighted the contribution made to the economy by the UK Aerospace Industry.

  Last year that contribution was in excess of £18 million. 60 per cent of this was made up of exports, creating a positive trade balance of £3.8 billion. The UK is the world's second largest exporter of Aerospace and military equipment after the USA. The aerospace sector employs over 150,000 directly with a further 300,000 employed indirectly.

  Naturally the effects of 11 September are badly hurting the British aerospace industry, with 11,000 job losses already announced, with a further 18,000 in the immediate supply chain. It has estimated that a total of 40,000 jobs are vulnerable. This represents 10 per cent of Britain's aerospace workforce. Our economy cannot afford to lose these highly skilled jobs.

    —  For every job lost in leading companies, three are lost in the supply chain.

  All the indications are that these numbers are just the tip of the iceberg with job losses expected to double in the next six months if no action is taken. Aerospace is an industry where British skills, British companies and factories have been at the leading edge of developing better, quieter and more fuel-efficient engines and aircraft.

  These developments ensure that Aerospace is one of Britain's last remaining world class, high technology manufacturing industries. The long-term success of the British Aerospace Industry is reliant on the UK's ability to continue to develop new technologies through Research and Development.

4.  INVESTMENT, RESEARCH AND DEVELOPMENT

  As a first step it is essential for government to increase the share of GDP devoted to worthwhile public investments. Public infrastructure improvements produce returns across the economy and can influence the future investment and location decisions of multinationals. We agree with the joint TUC/CBI study into productivity that it is imperative that the 10-year transport plan, published in 2000 is turned into reality.

  Government, industry and academia must decide jointly on a technology strategy for the UK. The Government needs to provide leadership and initiative to key high technology industries such as Aerospace and Electronics more directly into the national science base.

  For this to succeed we must look towards diverse funding options. We believe that a greater level of public funding and resource needs to be allocated to long-term aerospace research and technology to match the spending levels of other countries. Not only will more funding be needed, but greater co-ordination of resources would also help. This will help to stop the fragmentation of research and development.

  For example, the US currently spends three times as much as Europe on Research and Development in Aerospace. In 2000 the European Aerospace Industry spent 14.5 per cent of its annual turnover on research and development with the UK spending 10 per cent of its turnover.

  A good model of innovative funding comes from Canada where since Government support was provided for research and development the Canadian industry has risen from seventh largest supplier to fifth largest in the world.

  The Canadian Government views Aerospace as an innovation leader, a critical incubator of technologies that find applications in almost every other sector of Canada's economy.

  Canada's Aerospace and defence industries are a key area for investment by Technology Partnerships Canada (TPC), a technology investment fund established to contribute to the achievement of Canada's objectives: increasing economic growth, creating jobs and wealth, and supporting sustainable development.

  Aerospace and defence are knowledge intensive industries that account for some 15 per cent of all Research and Development performed in Canada. Investments by Technology Partnerships Canada (TPC) leverage increased innovation spending in Canada's aerospace and defence industries, helping this vital part of the Canadian economy maintain and expend its position of technological excellence.

  The fiscal year 1998-99 included the following TPC achievements:

    —  approval of more than $214 million in repayable investments for 22 Canadian research and development projects;

    —  additional investment commitments of $1.78 billion in innovation and spending; and

    —  creation of 4,426 high quality jobs.

  Based on company forecasts these 22 projects if successful are estimated to generate sales of $16 billion.

  In three years of operation TPC collective achievements have included:

    —  approval of more than $775 million in repayable investments for 79 research and development projects;

    —  creation of 18,200 jobs, including 6,500 jobs over project R&D phases; and

    —  based on company forecasts these 79 projects if successful will generate $78.8 billion.

  In 1999 the TPC Fund will be increased to $50 million.

  TPC investments are fully repayable if the products are successful, with the Government collecting a royalty on sales, recouping original investments plus a share of profits.

  We recognise that companies need direct support to undertake research and development (R&D) if they are fully to exploit the results. The government should consider funding options such as the TPC initiative from Canada and develop an R&D tax credit, available to all companies and set at a rate that would have a significant impact on their R&D plans.

  A lot of the R&D costs are currently being met by suppliers in partnership with primary contractors and we believe that it would make sense for the government to look at the possibility of extending credits available to primary contractors to the supply chain also.

5.  LACK OF INVESTMENT IN SKILLS AND TRAINING

  Many employers see training as a cost rather than investment, it is essential that we create a culture of workforce development right across industry. There are obviously issues surrounding low skilled employment. Where low skills and minimal workplace development due to the needs of the business creates a "low skills equilibrium". It is more difficult to make the positive link between improved productivity and skills in workplaces like this. We have experienced, on occasion, employers arguing that there is no need to develop their workforce as giving their employees new skills would lead to retention problems as there are no promotion opportunities for higher skilled employees in their business.

  It is essential to foster a responsible attitude to the provision of skills across the many sectors in manufacturing. Employers are key to the provision of skills in manufacturing. Notwithstanding this fact, because there is a perception that training is costly, there are skill gaps across industry.

  We believe that in this case trade unions have a role to play in promoting workplace development. Trade unions have fully embraced the learning agenda with some quite spectacular results. The Union Learning Fund (ULF), Ufi and ILA's prior to their suspension gave a baseline from which trade unions could organise. With the statutory provision for learner reps working its way through parliament presently, vocational learning in unionised workplaces can consolidate and grow.

  There is an obvious fear that some employers may be excluded from the benefits of having representatives promoting learning to their fellow employees. Amicus-AEEU facilitated a recent ULF project in Derbyshire that took the trade union led learning culture from large employers, such as Rolls-Royce, and championed it in SME's in the supply chain.

  In his 2001 budget speech Chancellor Gordon Brown said:

    "Individuals should take more responsibility for their own development, especially with higher and transferable skills".

  We fully agree with this statement, and as a union we always make clear the link between learning, employability and job security. It must be stressed however, that employers also have a responsibility to up-skill their employees, as the clear link in this case is between a good collective skill base and the viability of manufacturing.

  Amicus-AEEU has a policy that promotes employee development in our recognised workplaces. Some of our learning projects have concentrated on the promotion of vocational skills that are not directly relevant to the needs of the company's business. Employers appreciate this type of advocacy as it has a clear knock-on effect to have a workforce that is prepared to engage in training.

  Employers and trade unions must look to address the basic skills problems of individuals, increase the proportion of adults with level two qualifications and increase the take up of Investors in People by small organisations.

  We agree with the TUC and CBI that the Government should introduce a training tax credit for employers that are involved in basic skills training or supporting employees working to gain initial qualifications. It should also provide incentives for individuals to work at raising their own skill levels.

6.  PARTNERSHIP

  Amicus-AEEU has for a long time been the foremost exponent of the partnership approach. Many sectors in the UK economy are experiencing the challenges and opportunities being presented by globalisation. Intense competition forces companies to constantly adapt just to survive. We believe that in order to effectively cope with change, companies will need more than ever to rely upon their most precious resource—human capital.

  We will always reason that it makes sense for companies to work more closely with their employees, to consult them and involve them in key decisions and ensure that they see the point of radical changes in the organisation.

  We believe that partnership must be transparent and equitable and as a union we would never turn a blind eye to partnership being used as a cynical ploy to drive change through a reticent workforce. Unfortunately, this has happened in a small number of instances. Partnership is not a quick fix. It's a journey without end. It is not easy—it is hard work. It does not end all differences at work—it often intensifies the level of debate as to the way forward. But by working together, in the spirit of partnership, we are certain that companies and workers can improve and survive and manage change in a way that benefits all stakeholders—mutual reward based on mutual respect. It is our opinion that partnership in the workplace is fundamental to improving the competitiveness of the UK workforce.

  Two good examples of partnership are the recent achievements at Airbus and Perkins Engines. The Airbus agreement ensured that our members played their part in helping their company galvanise their competitiveness, post 11 September, while the initiative at Perkins Engines improved the competitive position of the company through waste production.

6.1  A Partnership Case Study—Airbus

  As part of the 2002 and 2003 pay award, the trade unions and the company agreed to support the reduction of production costs in line with reduced customer demand. Additionally, the agreed new process improvement methods which will provide them, both in the sort-term and the long-term, with the ability to meet immediate and future changes to their programmes, thereby further strengthening our long-term competitiveness.

  Crucially, both the company and the trade unions recognised that these measures were vital to maintain the skill base they need now and in the future.

  Examples of measures taken include:

    —  a revision of a pending pay award to help stabilise the company's financial position;

    —  a joint company/TU feasibility study within an agreed timescale to achieve process improvements vital to the future of the business. As part of their commitment, the company agreed to explore every opportunity of insourcing new work in line with it's industrial strategy, thereby providing increased employment security in the medium to long-term;

    —  a reduction in the working week, to assist with the introduction of the Airbus Production System and required manning levels;

    —  redundancy support for employees wishing to volunteer for redundancy and utilise their skills in other areas of manufacturing. Additionally, the company agreed to offer a full and comprehensive package of support to any employee, that despite efforts to meet the current challenges facing the business found themselves in a compulsory redundancy situation;

    —  greater flexibility through agreement with and promotion by the trade unions;

    —  fixed holidays, a four-day working week, and a time in lieu arrangement for overtime to help the business better manage peaks in the work programme and start up costs.

  A large part of the unions' vision for the future involved a greater emphasis on training and the unions successfully argued that a greater investment in skills would lead to better work content and more satisfying jobs for employees as well as improved productivity and competitiveness of the company. Four hundred staff have completed NVQ level 3. Sixty on site assessors have been trained to help continue to develop the workforce.

  This is a good example of partnership being sufficiently flexible enough to react quickly to a situation. We believe without a constructive dialogue with the employer initiatives like this would not even get off the ground. The employees in this situation, after the company had shared information with them, sacrificed a number of conditions of their employment to ensure that their workplace has a chance for the future. We are in no doubt that a proactive partnership is fundamental to increased productivity in the global marketplace.

  Too many employers in the aftermath of 11 September did not believe that they could achieve rationalisation on this scale to sustain their competitive position. It was only because of the existing partnership at Airbus that this dialogue could even take place.

6.2  A Partnership Case Study—Project Supersavers, Perkins Engines

  Two AEEU convenors pioneered an environmental project that has saved their company thousands of pounds, the project was initiated and run on partnership principles.

  Tony Ellingford and Paul O'Hearn designed Project Supersavers in 1996 inspired by attending a "Workplace Change" seminar organised by the AEEU. As the company had begun improving its environmental performance and there was a need for a fresh approach to industrial relations Tony and Paul decided to grasp the nettle.

  They approached the management with ambitious plans to involve the entire company in eliminating waste and conserving energy. The company was responsive realising the project could yield benefits in terms of finance, health and safety and naturally, the environment.

  The convenors assembled a team, which would focus on spreading environmental best practice throughout the plant. It was felt that a "bottom up" approach was key to achieving success. A survey had revealed enthusiasm for environmental improvements amongst the workforce but little awareness of the company's initiative.

  By providing every employee with an explanatory book and plastering the factory with information posters the projects message was advertised widely. The booklet contained practical suggestions on energy saving and environmental responsibility. In addition, employees were asked to provide suggestions on waste education, these ideas were then compiled on a database.

  The project has heralded radical improvements. It has been estimated that £100,000 a year has been saved through waste reduction, awareness of environmental issues has been raised and annual carbon emissions have been trimmed by 1,600 tonnes.

  Once the project became familiar new concepts were introduced. For instance, every now and then production will cease for a day in one area of plant to review equipment, identify links and locate where waste can be reduced. This process is called "blitzing".

  The success of Project Supersavers has been outstanding, so much so that the two convenors have visited Perkins parent company, Caterpillar in the US to convey the ideas to senior executives.

  Based on simple principles and achieved through patient and committed work inspired by a clear vision, Project Supersavers demonstrates that partnership unleashes the input of employees and delivers tangible benefits for employees and employer alike, an excellent example of employees delivering change to maintain the competitive position of their company.

7.  AMICUS-AEEUS' KEY POINTS:

    —  We firmly believe that it is essential that the Government appoint a Minister for Manufacturing with a clear responsibility for manufacturing issues.

    —  Government and companies need to take a more pro-active attitude to investing in essential skills needed across manufacturing. We welcome the Chancellor's recent moves in the pre-budget statement on this matter and look forward to the development of the Sector Skills Councils.

    —  The Government must continue to actively encourage inward investment in UK manufacturing and explore other funding methods such as the TPC programme in Canada.

    —  We would encourage the Government to vigorously seek entry into the Euro at a manageable level. We welcome its recent profile in the Prime Minister's and Chancellor's speeches but believe the case needs to be made more explicitly to the British public.

    —  We call for the partnership approach to be taken more seriously in industry. It is key to fostering good industrial relations, addressing skills shortages and boosting productivity. Trade Union's have a vital role in delivering these goals. However, the process is a two-way street, recent high-profile plant closures have been handled in an appalling manner breaching this spirit of partnership.

    —  There requirement for the wider dissemination of best practice throughout the economy. Formal structures would ensure that this could be achieved jointly by trade unions and employers.

    —  A tax credit for employee development that encourages employers to up-skill and continuously develop their workforce. This could be extended to capture SME's through dissemination of beat practice.


 
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Prepared 14 June 2002