Tentative steps in the right direction

Britain’s manufacturing firms seem to be putting the days of redundancies behind them, with a new emphasis on the search for skills.

Manufacturing industry is showing some signs of life. True, electronics firm Panasonic has announced 1,300 redundancies in Wales, blaming the move on the strong pound. And, yes, CBI research suggests that manufacturers’ confidence is still very fragile.

But recent research from Cranfield University into the recruitment activity of 500 firms suggests that skills shortages, rather than redundancy schemes, now top the agenda of some personnel directors in the sector.

The Recruitment Confidence Index, published last week by Cranfield University, TMP Worldwide and the Daily Telegraph, has swung upwards, with demand for products and for staff strengthening. Using an index where values over 100 represent increased recruitment activity, the RCI finds manufacturing recruitment rising from 113 last December to 122.

"For the first time since the quarterly index was launched last year manufacturing organisations predict an increase in the number of employees," said Jos van Ommeren of Cranfield University. "It signals that manufacturing organisations are hiring more to meet the demand for increased product and not simply increasing productivity."

The development has taken many by surprise, when it was assumed that the strength of the pound against the euro was killing off traditional businesses, especially if they relied heavily on exports.

According to Birmingham Chamber of Commerce, many manufacturers are learning to live with the high value of the pound. One obvious strategy is to use the purchasing power of sterling to source from overseas. "You would not do that in an ideal world, but sometimes it is not possible to avoid," said policy executive at the Birmingham Chamber of Commerce, Annette Fitzgerald.

The pattern is well established in the car industry. Bruce Warman, personnel director of GM subsidiary Vauxhall, says pressure on margins in the sector remains, but firms are adapting.

"It is difficult for the car industry, and for the components makers it is even tougher. Many are opening facilities in non-UK countries, particularly eastern Europe."

Some car makers, including Peugeot and Vauxhall, are doing well, and while the industry has struggled in terms of volume production, the luxury market is booming. Jaguar and Rolls-Royce Bentley, for example, have been busy recruiting this year.

Warman reports that Vauxhall is in fierce competition for skilled engineers in the Wirral, Merseyside, where Jaguar has a plant. "Jaguar is now recruiting and bringing in new people," said Warman. "In the Wirral, we are finding that the job market is tighter for technical people, including engineers. We do not produce enough of them."

This highlights the real dangers posed by the shortage of skills. Next year the Birmingham Chamber of Commerce will adopt skills shortages as the theme of a year-long campaign.

Large numbers of unemployed people have serious literacy and numeracy problems – the proportion on the Government’s New Deal with serious reading problems is about 40 per cent. This explains why the economy is starting to behave as if there were full employment even though more than one million show up on the register.

"Employers do try to bring these people into the jobs market, but they cannot do it all themselves," said Fitzgerald at the Birmingham Chamber of Commerce. "Firms are very tightly squeezed and the least they could expect is that someone showing up for interview would have the three Rs."

There is also a massive task in retraining, she added. "For example, there are problems where people have been in certain jobs for years and years. All of a sudden they get made redundant, and trying to transfer their skills is very difficult."

Both the Recruitment Confidence Index and the latest figures from the Engineering Employers’ Federation show pay awards edging upwards to about 3 per cent as the demand for talent hots up.

The challenges for HR in manufacturing are considerable, but fortunately they overlap. The continuing strength of the currency makes it harder to compete on grounds of cost, forcing companies to innovate. This means investing more in people and in training, which is also the solution to the more immediate problem of skills shortages.

Smiths Industries has maintained its graduate training programme through lean times and it is proving priceless now. "You are not going to be able to fight for the talent if you have nothing to offer," said HR director Anne Minto. "We find with graduates that when we are interviewing them they are doing likewise – interviewing the company. They are much more discerning than even 10 to 15 years ago."

Smiths is also a keen supporter of the Year in Industry initiative, which gives a year’s experience between school and university and overcomes the staid image of manufacturing. "There is nothing more exciting than building flight management controls for an aircraft or producing medical equipment that saves people’s lives," said Minto. "Unless you allow people through the door, they associate manufacturing with being grubby and grimy."

David Yeandle, deputy director of employment policy at the EEF, said companies are learning to add value by offering a complete service, rather than competing on price alone. "More and more engineering firms are looking not just at providing a product but a broader service including design, sale and follow-up."

This has the added advantage of making the company more attractive to work for. Sussex-based firm Image, for example, transformed itself from a struggling paper manufacturer to a thriving design company after pioneering the technique of printing adverts on the back of travel tickets. It now also has a sideline as an Internet service provider for other companies.

A potential world-class company is Farnborough-aircraft.com, set up by Richard Noble, who built the car that broke the land speed record in 1997. His idea is for an airborne taxi scheme that would make use of the thousands of short runways in the world to offer convenient executive travel.

There is plenty of inventiveness in Britain’s manufacturers. But a shortage of technical skills could hold it back.

• 43 per cent of manufacturers expect an increase in employment levels in the next six months


• 54 per cent of manufacturers anticipate increased demand for their main product


• 19 per cent of manufacturers expect annual pay rises of more than 4 per cent

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By Philip Whiteley