Workforce, Skills and Training Issues in the ...

Workforce, Skills and Training Issues in the Contracting Community

R. Wilson, T. Hogarth, C. Koerbitz, M. Kerry and M. Winterbotham

October 2007 CONTACT DETAILS:

Rob Wilson Institute for Employment Research University of Warwick COVENTRY, CV4 7AL [email protected]

Tel:

+(44) 2476-523530

Acknowledgements The authors are grateful to COGENT and the SSDA for funding this research. Thanks are also due to the project Steering Group, including Pauline Hughes, Rakhee Gadhia, Helen Lindsay, Chris Lawton and Liz Rooney. The project would not have been completed successfully without the active cooperation, support and assistance of the ECITB who provided access to their data. Martyn Kerry and Christoph Koerbitz carried out much of the interviewing. Peter Millar and Andrew Holden carried out much of the statistical analysis and model building. Faye Padfield also contributed to the preparation of the final report. None of these bear responsibility for any remaining errors, nor for the views expressed

CONTENTS Summary........................................................................................................................... ix 1

2

3.

4

5

Rising Concerns in the Contractor Community ..........................................................1 1.1

Background ........................................................................................................1

1.2

Importance of the Contracting Community.........................................................2

1.3

Characteristics of the industry and its supply chain ...........................................4

1.4

Drivers of business demand and related issues.................................................6

1.5

Labour demand ..................................................................................................8

1.6

Skills supply......................................................................................................11

1.7

Skill mismatches...............................................................................................12

1.8

Assessment of future prospects from existing research...................................14

1.9

Conclusions from previous research ................................................................15

The current position: value and use of existing data................................................16 2.1

The value of existing data from official sources ...............................................16

2.2

Defining the Contracting Community................................................................16

2.3

Limitations of the Official Data Sources ...........................................................20

2.4

Identifying the Population of Interest ................................................................21

2.5

Data to build a Stock Flow Model.....................................................................25

Perceptions of the Contractor Community ...............................................................26 3.1

Aims of the qualitative research .......................................................................26

3.2

Profile of Respondent Companies....................................................................27

3.3

Client use of contractor companies ..................................................................28

3.4

Views on size and occupational structure of the Contracting Community........29

3.5

Current supply and demand of labour and labour market issues.....................30

3.6

The anticipated level of future demand for contractor staff ..............................38

3.7

Trends, issues and implications .......................................................................39

Development of the Stock Flow Model.....................................................................42 4.1

Background ......................................................................................................42

4.2

Construction of the Stock Flow Model in Practice ............................................45

4.3

Scope for further refinement.............................................................................47

Employment prospects for the Contractor Community ............................................48 5.1

Background to the projections..........................................................................48

5.2

Benchmark scenario.........................................................................................48

5.3

Alternative Scenarios .......................................................................................55

5.4

Concluding remarks .........................................................................................69

Annex A: Methodological Approach to Interviews............................................................70

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Annex B: The Contactor Model ....................................................................................71 B.1

Running the model ...........................................................................................71

B.2

Typical Results .................................................................................................80

B.3 Data inconsistencies and discontinuities ...............................................................83 References.......................................................................................................................84

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List of Figures and Tables Figures Figure 2.1 Figure 4.1

Identifying the Contracting Community General Approaches to Skills Forecasting

Figure 5.1 Figure 5.1a Figure 5.1b Figure 5.2 Figure 5.3 Figure 5.4 Figure 5.4a Figure 5.4b Figure 5.5 Figure 5.6 Figure 5.7 Figure 5.7a Figure 5.7b Figure 5.8 Figure 5.9

Overall Employment Trends –Benchmark (default) Scenario Employment Trends, onsite staff –Benchmark (default) Scenario Employment Trends, offsite staff –Benchmark (default) Scenario Replacement Demands onsite occupations–Benchmark (default) Scenario Replacement Demands onsite occupations–Benchmark (default) Scenario Overall Employment Trends – Alternative Scenario 1 Employment Trends onsite staff – Alternative Scenario 1 Employment Trends offsite staff – Alternative Scenario 1 Replacement Demands onsite occupations– Alternative Scenario 1 Replacement Demands onsite occupations–Alternative Scenario 1 Overall Employment Trends – Alternative Scenario 2 Employment Trends onsite staff – Alternative Scenario 2 Employment Trends offsite staff – Alternative Scenario 2 Replacement Demands onsite occupations– Alternative Scenario 2 Replacement Demands onsite occupations– Alternative Scenario 2

Figure B.1 Figure B.2 Figure B.3 Figure B.4 Figure B.5 Figure B.6 Figure B.7

The Navigation Panel Growth rate assumption table Assumptions regarding Growth rates Occupational structure assumptions table Assumptions about occupational structure Assumptions about occupational structure Replacement Demand Module

Tables Table 1.1 Table 2.1 Table 2.2 Table 2.3 Table 5.1 Table 5.2 Table 5.3 Table 5.4 Table 5.5 Table 5.6 Table 5.7 Table 5.8 Table 5.9 Table 5.10 Table 5.11 Table 5.12

Occupations in the contracting industry Coverage by Standard Industrial Classification Coverage by Standard Occupational Classification “Boost Factors” applied to ECITB data (2005) Overall Employment Trends –Benchmark (default) Scenario Employment Trends, onsite occupations –Benchmark (default) Scenario Employment Trends, offsite occupations –Benchmark (default) Scenario Replacement Demands –Benchmark (default) Scenario Overall Employment Trends – Alternative Scenario 1 Employment Trends, onsite occupations – Alternative Scenario 1 Employment Trends, offsite occupations – Alternative Scenario 1 Replacement Demands – Alternative Scenario 1 Overall Employment Trends – Alternative Scenario 2 Employment Trends, onsite occupations – Alternative Scenario 2 Employment Trends, offsite occupations – Alternative Scenario 2 Replacement Demands – Alternative Scenario 2

Table B.1 Table B.2 Table B.3 Table B.4

Overall employment in the contractor sector Employment by project type (on site) Results of change in occupational structure (onsite) Main Replacement Demand Results

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Summary IFF Research and the Warwick Institute for Employment research were commissioned in 2006 to undertake a study of the Workforce, Skills and Training Issues in the Contracting Community. This report describes the problems facing the Contracting Community and develops some new tools to help anticipate the scale and pattern of future skill requirements. In broad terms, the Contracting Community is defined as providing services, on an ongoing basis, for both maintenance support and capital build, to the marine, chemicals, gas, petroleum, electricity generation, nuclear power, structural steel, and other processing and related industries. The project began with a review of previous research and of what information could be obtained from official sources. This document provides an overview of such data. It focuses on the possible use of such data to develop and populate a quantitative model which can be used to assess the future prospects for the demand for and supply of skills in the Contracting Community. The model developed focuses upon the stocks of people employed and the flows in and out of this stock. It is referred to in what follows as the Stock Flow Model. Following a brief outline of the background to the project, the Report sets out why the Contracting Community is so important to the UK economy. For example: ƒ ƒ ƒ

According to the Engineering Construction Industry Training Board (ECITB) the client industries served by engineering construction in 2004 represented between 10 and 20% of total contributions to UK GDP; The energy sector is one of the most crucial in terms of its significance to the UK economy, with the chemicals and pharmaceutical sectors also of key importance through their contributions to GDP and exports; Although the employment footprint of the Contracting Community itself is far smaller than its client sectors, there are multiplier and supply chain issues to consider. Geographically, the industry is clustered around Aberdeen, and in parts of the East of England, the North East, North West, London and the South East. Given the continued importance of oil and gas extraction, Aberdeen is a dominant centre of activity.

The literature review focuses on the key characteristics of the sector, adopting a supply chain approach to highlight the different roles of clients and contractors. It highlights some of the key drivers of business demand, reviewing previous research and considering the availability of relevant data, before considering the implications of all this for labour demand and the demand for skills, using a quantitative stock flow model. This demand perspective is contrasted with skills supply and the implications for possible skill mismatches are drawn out: ƒ

The review suggests a highly cyclical pattern of demand, with much work undertaken on a project-by-project basis, and considerable volatility. A key development in recent years has been a steady move away from work on new capital projects and more emphasis on repair, maintenance and decommissioning. Additionally in the energy and fuel industries, the slowdown in output from North Sea oil and gas is driving a switch from investment in extraction to storage.

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An ageing workforce is identified as a major challenge for the Contracting Community in many of the studies reviewed. This has implications for replacement demand and loss of key skills and experience. Declining inflows of younger people available to join the sector exacerbates this challenge. The reviewliterature points to low take up of apprenticeships in the sector, the greater attractiveness of other sectors to engineering graduates, and the attractiveness of lucrative employment on overseas contracts, as well as declining participation in science, engineering and technical (SET) courses from which the industry has traditionally recruited. Competition on the basis of price is seen as inhibiting innovation, with more innovative proposals often losing out to lower cost bidders.

It is clear from the review that there are considerable difficulties in defining the population of interest precisely. The available evidence, drawn from a number of sectors in which contracting companies are engaged, provides a good deal of information about the problems facing contractors and the implications for the contractor workforce. However, it is not possible from previous research to assess with any degree of certainty the total number currently employed, the occupations in which they are working, nor the trends over time. Whilst various authors emphasise the substantial nature of skill shortages across a number of sectors of relevance to the study, it is difficult to be precise about the scale of those problems for the contractor workforce as a whole. Part of the problem is that the contractor group cuts across many sectors. This suggests the need for a new approach that considers the contractor workforce as a distinct entity in its own right which is what the present project attempts to provide. The review concludes that, generally, information from official data sources such as the Labour Force Survey and the Annual Business Inquiry is not sufficiently detailed to obtain an accurate picture of the current level of employment in the Contracting Community, nor of its composition. This is because of the relatively small size of the Contracting Community, together with the problem of identifying the precise footprint of the sector based on official systems of classification, with the Contracting Community making up a small part of a range of Standard Industrial Classification (SIC) codes The use of such official data for model development and forecasting was therefore not deemed feasible. However, in the course of the review it became clear that the ECITB, the National Training Organisation for the Engineering Construction industry, with its data from statutory returns, was a viable source of relevant data on a core element of this group, although there remain a number of uncertainties about how well the ECITB database matches the overall footprint of the Contractor Community. Efforts were also made to resolve at least some of these uncertainties by the use of more qualitative methods to validate the data from ECITB and other sources. This involved (inter alia) interviews with a number of key members of the Contractor Community (both clients and contractors) and also bringing interested parties together in a Workshop. A number of key messages emerged from the interviews. ƒ ƒ ƒ

Both clients and contractors shared the view that demand for labour is at a recent high and likely to increase, but the supply of suitably skilled labour is problematic. Difficulties in recruiting skilled staff affect all parts of the industry, both contractors and clients. Respondents strongly supported the picture of an ageing workforce which emerged from the review of recent literature. This suggests a demographic shift x

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towards those aged over 50s, coupled with severe difficulties in attracting and retaining suitably qualified young people. Respondents also described a trend of take-overs and consolidations in recent years amongst the Contracting Community. Reduced competition was felt to be leading to an increasing emphasis on price, whilst reducing innovation and other improvement practices.

A key output from the project is a prototype Stock Flow Model. The aim of developing this quantitative model was to provide a tool that could be used for examining the current numbers employed and the prospects for the future. It presents for the first time a consistent quantitative picture of how the demand for skills may be changing for the Contracting Community and how it may evolve over the next few years. This model has been used here to develop some possible future demand scenarios for the Contractor Community which highlight the potential scale of problems that it faces. The focus in the Report is on the overall scale of demand changes and the possible implications for supply-demand balances. The precise quantitative results remain subject to some uncertainty but they indicate a likely intensification of the current difficulties being faced by the community and the need for steps to boost training activity as well as undertaking other measures to anticipate and pre-empt the problems which lie ahead. All the scenarios explored suggest that demand is likely to grow substantially relative to recent experience. A “Benchmark scenario”, based on the assumption that employment in the Contractor Community as a whole grows in line with the rate for the whole construction sector as suggested in Working Futures, is presented first. While this takes no account of more recent information which suggests a marked upturn in demand it provides a rather conservative yardstick against which to consider other possibilities. Although the historical patterns show considerable volatility, some groups amongst onsite staff such as other technicians are projected to exhibit very rapid growth even under this scenario. In contrast, groups such as welders and pipe fitters exhibit strong negative trends. The projected trends for off-site staff are generally flat. However, the implications for replacement needs and total requirements over the period to 2014 suggest that these will be positive for all occupations resulting in the need to recruit and train, even in many of the areas where employment is projected to decline. Two alternative scenarios are presented based on soundings from the industry about possible future increase in activity levels. These suggest an overall increase in employment in the Contractor Community of a minimum of 5% p.a, (which is in fact only just slightly faster than the average trend rate of increase exhibited over the last 10 years) and a maximum of just under 7% per annum. These scenarios result in quite rapid rates of growth in demand for many occupational categories, implying recruitment difficulties for employers and for training providers to fill the ensuing gaps. When replacement demands are also taken into account, the pressures seem likely to result in severe recruitment and retention problems for many contractors and could jeopardise the operations of many clients. Some of the occupations most affected include the “other technicians” category, professional scientists and engineers, electricians, electrical technicians, instrument technicians, and NDT personnel. Even in the rather conservative benchmark scenario the prospects are for a considerable increase in demand for skills amongst the Contractor Community, especially if the focus is upon replacement needs. In the two alternative scenarios, both of which have some credence in the industry, these pressures would be accentuated. In the most bullish scenario employment would almost double and the demand for many skill categories xi

would increase at an even faster rate. Meeting these demands will require substantial changes to existing training programmes as well as various other measures to avoid the negative consequences of emerging skill shortages and skill gaps (including measures to reduce wastage and encourage inflows into the community from other parts of the labour market. From the outset it was clear that this would be challenging project, not least because of the difficulties of defining the Contracting Community precisely and because of the limitations of most official data sets for measuring the scale and structure of this particular sector. This and other issues are discussed in more detail in the other sections of this report. This project would not have been possible without the active cooperation and assistance of the ECITB who provided access to their data.1 Although the data that have been assembled are far from perfect for this purpose, they at least begin to illustrate the scale of the problem and the range of future possibilities. While there are many gaps in the data ideally required to build a comprehensive Stock Flow Model, the results produced demonstrate the potential value of such a tool, given better data. The areas identified for improvement should encompass better data on overall employment numbers (especially those elements not covered by the ECITB database), as well as the elements needed to measure discipline profiles and replacement needs more precisely. Another key data requirement is relevant information on past, current and future activity levels in the sector (including decommissioning). Improved estimates of employment might be achieved in the future: • through more detailed access to existing ECITB data, including the ability to cross-classify information across the various key dimensions; • by a new customised data collection process (although it would obviously take a number of years to build up a usable time series of information); • or some combination of the above. Copies of the Stock Flow Model have been lodged with ECITB, COGENT, SEMTA and the SSDA. The structure of the report The remainder of the report is structured as follows: 1. 2. 3. 4. 5.

1

Overview of the problem; The current position: value and use of existing data; Perceptions of the Contractor Community. Development of a stock flow model; Employment prospects for the Contractor Community.

The authors gratefully acknowledge this assistance but emphasize that ECITB bear no responsibility for the way in which their data have been used here.

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1

Rising Concerns in the Contractor Community

1.1 Background During 2006 employers operating within the chemical, nuclear, oil and gas, petroleum and polymer industries expressed concerns to COGENT and others about the capacity of contractors to meet the immediate and longer term needs of the industry as required for routine shutdown maintenance, scheduled non-routine work and major capital investment. In discussion with related SSCs and other stakeholders (i.e. those that have employers falling within scope of clients commissioning such work, or contractors that work on shutdowns, repair and maintenance, or capital investment projects on refineries and the like) it was decided to commission some new research to address these issues. This project was set up in response to these concerns. The overarching aim was to inform policy directed at ensuring that the future supply of suitably skilled contractor workers can satisfy demand. The more detailed aims were: • to explore the demography of the workforce and its skills profile, by discipline (generally simply proxied by occupation); • to understand how closely the supply of skilled workers matches the requirements of the industry in the short, medium and long term; and • to establish in broad terms any training and development investment needed.

The project has focused upon: • a review of previous research and available evidence; • an exploration of the possible use of secondary data from official sources as well as data held by SSCs and other bodies including the ECITB; • collecting some new primary data of a qualitative nature; • producing a quantitative stock flow projection model of skills demand, covering all disciplines. In broad terms, the Contracting Community is defined as providing services, on an ongoing basis, for both maintenance support and capital build, to the following industries:2 • marine; • chemicals and pharmaceuticals; • petroleum refineries; • offshore oil and gas industry; • nuclear industry; • structural steel; • power generating plants (gas and coal fired). From a functional perspective, the DTI study3 on design and engineering contractors within the oil and gas industries, describes the contractor element as one that: • applies engineering know-how to design a plant or facility; • procures equipment; and • manages construction (commission and/or start up). 2 3

Defined by the Standard Industrial Classification DTI, Design and Engineering Contractors in the Oil and Gas Sector: Update February 2001, Department of Trade and Industry, London, 2001

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Most of the previous research covers only small parts of this footprint and do not provide a comprehensive coverage of the community, as described above. Employment forecasts provided by the ECITB4 provide the most comprehensive coverage but even these documents exclude some parts of the contracting workforce. Many of the available data and reports relate to the energy industry: to upstream activities relating to oil and gas extraction; and downstream activities to do with refining, processing, and power generation. There is much les information for the other subsectors. A key problem is that many of the contractors working in this kind of activity are employed by larger companies with many other interests. Identifying the parts of their activities associated with the services of interest to this project is therefore often very difficult.

1.2 Importance of the Contracting Community It is worth emphasising the importance of the Contracting Community to the UK economy. This can be considered with respect to its contribution to the economy, its functional importance, and the volume of employment it provides. According to the ECITB the client industries served by the UK engineering construction sector in 2004 represented between 10 and 20% of the UK economy in terms of contributions to overall GDP.5 It is therefore crucial that they can find the right level of expertise and labour in the UK Contracting Community or they may move their operations overseas with significant loss to the UK economy. The sectors it supports include Energy, Chemicals and Marine engineering. The energy sector is a crucial component of any economy. In recent years the UK has exploited large natural reserves of oil and gas, mainly in the North Sea, which have provided strong support to the economy. Other things being equal, it is desirable for UK registered companies and employees to benefit from its extraction and processing, simply from the point of view of tax revenues. Other elements of the energy sector, including conventional power generation as well as nuclear plant, play a key strategic role in the economy. The chemicals and pharmaceutical sectors are also of key importance in terms of contributions to GDP and exports. Marine engineering, while of much less significance now in terms of contributions to output, still plays a crucial role in building and maintenance of naval vessels. Again this implies a significant strategic importance to the country. In terms of output and government revenues, North Sea oil and gas has contributed a huge amount to the UK economy since the early 1970s. The other sectors, while less significant in these terms also make an important strategic contribution to national output and the trade balance.

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ECITB Manpower Requirements Forecasts, Spring 2001; and subsequent forecasts, including the 2005 Market Report and the 2006 Industry Report. ECITB (2004) MRM The skills profile of the Engineering Construction Industry, ECITB, Kings Langley

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In terms of employment the client sectors are much less significant (accounting for only around xx% of total employment) and the Contracting Community itself even less so. This poses one of the main problems with which this project has had to grapple. The sector’s small employment footprint makes it difficult to obtain reliable information about the workforce. It is difficult to be exact about how many people are employed in the Contracting Community as a whole. As a minimum the 66,000 covered by ECITB in 2006 should be included.6 The DTI study conducted in 20017 suggests that 10-20,000 are employed in the oil and gas industries although not all of these may be in the Contracting Community. These issues are discussed in more detail in Section 2 below. There are multiplier or supply chain issues to consider too. In the East of England, for example, it was estimated that around six jobs in the wider economy were dependent upon each one in the energy industry.8 In addition, the industry potentially provides export opportunities from overseas contracts in areas with high levels of oil and gas reserves such as the Gulf of Mexico, Brazil, West Africa, and the Caspian Sea. Whilst the contracting industry is of strategic importance in building, maintenance, and repair of key installations such as power stations, oil refineries, etc., it is not without its problems relating to the level of business demand and the supply of, and demand for, labour, often exhibiting strong cyclical effects and great volatility.9 The most recent ECITB forecasts suggest a significant increase in the future level of demand for labour and overall levels of activity. However, this and other reports also emphasise the volatility of employment as particular projects start up and close.10 Nevertheless, there appears to be widespread consensus that the demand for labour is likely to outstrip supply over the next few years. This is for the following reasons: i. the impending exit of many older workers;11 ii.

declining numbers of people entering engineering type professions – at graduate and NQF 3 levels – upon which the contracting industry is dependent;

iii.

the transferability of skills to other sectors of the economy (e.g. nuclear related skills are in demand in the health service), or to major Construction projects, most notably the Olympics;

iv.

global shortages of people in the industry with available supply being drawn to the more hazardous areas of the world where rewards are highest.12

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9 10 11

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ECITB 2006 Industry Report, ECITB, Kings Langley, 2007. ECITB suggests that nearly 31,500 were employed in off-site occupations and 34,500 on-site occupations in 2006. ECITB does not cover all in scope of the contracting industry, for example in areas such as heating and ventilation. DTI op cit. OTM Consulting, The Energy Sector in the East of England: “Impact Study 2000” Review and Refresh, 2003 Cogent, Skill Needs Assessment of the Cogent Sector, 2006 DTI op cit. This is not just a problem for the UK but relates to other parts of the world too, for example in Canada 8,000 of the nuclear industry’s 20,000 workforce is expected to retire in the next ten years - Howlett, K. “Skills Shortage Looms in the Nuclear Industry”, Lake Ontario Waterkeeper, June 19, 2006 AFQ – ETA “Skills Deficit Looming in the European Electricity Sector”, Bulletin 06/04, 2004;

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1.3 Characteristics of the industry and its supply chain It is useful to take a supply chain view of the sector. Figure 1.1 is drawn from the latest ECITB 2006 Industry Report but reflects the approach adopted throughout this project and most previous research. Figure 1.1: Supply Chain view of the Contracting Community

Those companies at the top of the supply chain are the Clients. They decide the scale and type of engineering/construction activities they wish to sub-contract to Contractors. In some cases companies fall into both categories. The review of previous research provides some information about the current and possible future scale of such activities, as well as the benefits (and costs) of subcontracting out various activities. There are a range of issues which emerged from this review such as: • the extent to which control over the production process is retained or weakened; • the degree to which skill shortages are transferred out of the industry; • the extent to which contractors are better able to supply much needed skills (and which ones); • the demand for new skills within the contracting organisations (e.g. management of the process); • how well subcontractors are able to meet the demands of their main customers; • the nature of the relationship with the main company (e.g. long-term contracts versus short-term ones). Clients cover the SIC categories set out in previous sections. Contractors are more heavily concentrated in particular SIC categories, often specialising in dealing with the needs of particular clients.

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In the Contracting Community there are a number of large multi-national corporations engaged in the building, maintenance, repair, and decommissioning of major installations as an inclusive activity. In addition there are a large number of smaller companies and individual / sole traders. These comprise about 80-90 per cent of the population of companies within scope of the ECITB. According to ECITB estimates only 28 establishments in their sector have over 500 employees, 22 have between 251 and 499, and 93 employ between 51 and 250 employees. The remainder (209) employ 50 or fewer.13 Geographically the industry is clustered around Aberdeen, the East of England, North East, North West, and London and the South East. Given the continued importance of oil and gas extraction, Aberdeen is a dominant centre of activity. Research conducted in the East of England reveals that there tends to be a substantial, local supply chain attached to the contracting industry that might not necessarily be classified as belonging to that industry. When, for instance, the decision was made to close the Shell site in the East of England this had a substantial ripple effect through the local economy. As ECITB notes in its Sector Workforce Development Plan,14 the cyclical nature of the industry, with much work undertaken on a project by project basis, does not provide a solid foundation for all companies involved to maintain high levels of investment in all people engaged in engineering construction. This is one of the main arguments in favour of having a training body with statutory power to levy grants and deliver training as a public good. The ECITB also notes in its Sector Workforce Development Plan that the Engineering Construction industry has seen a shift in work type in recent years, with a steady and consistent move away from new capital projects towards more emphasis on repair and maintenance work. In the early 1990s as much as 60% of all engineering construction work was new build or capital projects. By 2002 this had fallen to around 25%. At the time the report was published new build made up around a quarter of the work, with repair and maintenance contributing the rest. Dismantling and decommissioning represent only a small part of the total, though this work is ‘reliable’ in being planned and long term. Organisational change is also taking place in the industry. Relationships between contractors and clients are changing, with a closer level of partnership developing (e.g. alliancing) and the industry is becoming increasingly global in its organisation. In relation to design, for instance, examples are cited of projects being conducted across three time zones such that the process can be maintained 24 hours a day and thereby accelerate delivery times. In relation to employment it reveals how the volume of work carried out in the UK, given a constant level of demand, is potentially falling away in some functional areas. Related to the supply chain are the range of opportunities that are germane to the contracting sector such as the demand for renewable energy – and the distinct set of skills that may be required here. Renewable energy is a recurrent theme in the literature

13 14

ECITB estimates for 2006 (email correspondence). ECITB (2003) Sector Workforce Development Plan.

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and indicates that new types of skill might be required to capture this market.15 At a local level, the existing supply chain will need to adapt to the market for renewable energy (e.g. offshore wind power) because the existing energy market is a mature and declining industry. It is clear from research by Williams,16 MRM Solutions (conducted on behalf of ECITB)17 and others that there are often conflicting views and tensions between clients and contractors. According to the study by MRM solutions the key message from the clients is that they (and the UK more generally) require contractors that can bring new levels of productivity required to compete in a global market. They are looking to reduce their costs. They see contractors as largely reactive and lacking in commitment and drive as well as innovation. In contrast, contractors regard many clients as having unrealistic expectations, and operating in an environment where unexpected contract variations are common, the avoidance of blame is key and reducing cost is more important than innovation. Although there is much talk about partnerships most customers maintain a distance from suppliers and price remains the main criterion for awarding a contract. Often the cheapest bid will be from the contractor who has least understanding of the requirement and clients end up with low cost plant rather than highly efficient plant. The focus on price means that the contractor that has invested in research and innovation will rarely win, such solutions tend to appear more expensive. Lack of technical skills by the client can lead to a failure to understand a more innovative solution. It is also important to recognise that only some 10-20% of the value of most major projects goes to pay for the contractor’s wages and other costs.18 The bulk of the total costs of a project are for the purchase of intermediate goods and services needed to build the plant (equipment suppliers). Maximum benefit to the UK will only be achieved if a large part of this is sourced in the UK.

1.4 Drivers of business demand and related issues The principal forms of demand relate to the commissioning, running, and decommissioning of major engineering constructions relating to the nuclear, oil, gas, and electricity industries, plus a demand for defence systems (e.g. nuclear powered submarines). It is difficult to obtain data relating to the commissioning of defence projects for reasons of confidentiality, but in the other sectors there also appears to be considerable uncertainty about the level of demand, with sharp peaks and troughs. In the late 1990s the emergence of Korean and Japanese contractors willing to bid below cost for contract work added to the contracting industry’s problems by driving down costs – and profit margins – making it difficult for UK companies to successfully compete. Further adding to the risks encountered by contract companies was the introduction of fixed price contracts. Part of the uncertainty relating to future demand stems from Government indecision over commissioning and decommissioning of nuclear power plants – to date scenarios have

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Douglas-Westwood Ltd., Shell Supply Chain Mapping, Report to EEDA, 2004 Williams, I. (2005) Productivity in UK Engineering Construction: - a view from the Industry. a report prepared for ECITB November. MRM Solutions (2004) The Skills Profile of the Engineering Construction Industry. Report for ECITB, ECITB Kings Langley. DTI op cit.

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been developed about future demand relating to whether existing power stations are decommissioned according to the current timetable, have their life is extended, or new commissions are forthcoming. A baseline scenario for the nuclear industry – which includes activities other than those relating to contractors – suggests that in the period to 2015 that the total net employment gain could be 8 per cent (above current employment levels), but that replacement demand will be even higher at 10 per cent of total current employment.19 It should be noted that decommissioning is a drawn out process that creates a substantial demand for labour. Closure of Dounreay, for instance, has created a substantial demand for contractors in the north of Scotland.20 It is estimated that over the short-term the UK Atomic Energy Authority (UKAEA) will employ 1,400 people directly, and that 1,500 contractor jobs will be created; 1000 in professional posts and the remainder in skilled trades.21 If, as is usually the case, the local economy does not possess these skills there will need to be significant in-migration from contractors. This illustrates another feature of the contractor workforce: the need for them to be geographically mobile. But it is not just the nuclear industry that causes uncertainties about the demand for services and labour. Other factors include: • the gradual slowdown in output from North Sea oil and gas reserves. One implication of this has been a switch in investment from extraction to storage; • the availability of potentially high value contracts in other parts of the world;22 • the introduction of new technologies that potentially lower the labour intensity of production; and • new organisational practices (such as “alliancing”) which potentially affects both the volume and type of labour and skills required (e.g. in relation “alliancing” customer relationship management skills are considered necessary). There is also an issue as to where contracting companies seek their work. In relation to oil and gas, for example, existing contracts tend to be for operations in shallow seas and, consequently, are relatively low value compared to the deep water contracts now becoming available in, for instance, the Gulf of Mexico. Contractors may therefore chase the high value contracts overseas rather than wait for contracts in the UK. Mitigating this effect are changes to the tax regulations that prevent people from the UK earning tax free incomes whilst abroad. They may feel that earnings from working abroad do not sufficiently compensate for the risk. Another major concern is that labour productivity on onshore engineering construction activity is not high enough (and indeed may have even declined). ECITB commissioned a study by Williams (2005) to explore this issue. Productivity is a key element in the competitiveness equation. The true cost of labour is determined not just by the wage but by labour productivity. Unit labour costs are likely to be a decisive factor in the location of plant in an increasingly globalised industry. The UK is regarded by some international

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21

22

An investigation into the future skill needs and potential interventions based on industry scenarios: the Nuclear Industry, 2006; Nuclear Skills Group, Nuclear and Radiological Skills Group, 2002 Daniel., W.W. et al., Tight Labour Markets in the Highlands and Islands, Report to FutureSkills Scotland, 2004 HIE/CASE, Securing Economic Benefit from the Decommissioning of UKAEA Dounreay, 2002; available at http://www.hie.co.uk/CAS-strategydocument.pdf?sksearchtext=Dounreay BECECA reports that a large share – 30-70 per cent at any single point in time – of its members’ contracts were for operations outside the UK

7

clients as a relatively high cost location not because of excessive wages but because of poor productivity. The study by MRM Solutions (2004) highlights the productivity issue as one of the main challenges facing the sector. They argue that if the UK contracting sector is to maintain its capability of supporting the UK’s process and power industries then it needs to change its working practices radically in order to raise productivity and improve its competitiveness. However, the review by Williams (2005) concludes that most comparative studies show little difference in productivity between the UK, Western Europe and the United States. His own analysis, based not on direct measurement but on the judgement of experienced practitioners suggested that productivity in the UK had not fallen but was well below best practice levels and that this record needed to be improved if the UK industry was to remain a serious competitor in world markets. His analysis suggests a sharp dichotomy between client and contractor perceptions. The clients perceive a workforce with poor attitude and lack of efficiency which is poorly managed and inadequately supervised. The NAECI (National Agreement for the Engineering Construction Industry) is seen as an instrument which raises costs without addressing the issues of improved productivity and the need for innovation in working methods. The contractors, under pressure to cut costs, feel unable: to innovate; to ‘capture the hearts and minds of the men’, and to change to the conditions required to achieve high productivity. They see the new incentive arrangements in the NAECI as a way of moving towards more competent site management and a well motivated workforce, while trades unions point to casual and indirect employment practices in the industry as a key cause of many of these problems, being conducive to neither alignment with management objectives or greater effort. Key skills gaps are identified as the quality of site management and shortcomings in onsite supervisors in view of the great responsibility placed upon them.

1.5 Labour demand As well as the drivers of business demand summarised in the previous section there are also specific labour issues to consider. These are: • the workforce is relatively old. This gives rise to relatively high replacement demands even with the more pessimistic projections of business demand; •

the industry struggles to recruit young people – for a variety of reasons – which exacerbates the issue relating to replacement demands (see supply side section for further details).

A recurrent theme throughout the literature is that of an ageing workforce, even if good quality, comprehensive statistical data to prove this are not readily available.23 Survey based research in the East of England provides the most robust indicator and demonstrated that 39 per cent of those employed in the energy industry in the region will 23

The ageing workforce is mentioned in relation to the energy industry, those sectors in the remit of ECITB, the Marine sector (see SEMTA, Sectors Skills Agreement for the UK Marine Sector Stages 1-3, 2006)

8

be over 50 years of age in 2009 (given the current age profile of the industry) and that 28 per cent of the workforce will retire over the next ten years.24 Again this study encompassed industries other than contracting, but if the age profile of the energy sector is replicated amongst the Contracting Community, then it provides a reasonable indication of the exit rate from the industry over the medium-term. Clearly, if demand stays at its current level this will create substantial replacement demands. Labour demand can not be treated as a lump. The demand for labour is skill specific, and many of the occupations common to the contracting industry are of an intermediate or higher level type (see Table 1.1). The study by MRM Solutions for the ECITB focuses on the skills required by higher level occupations such as managers and professional. They highlight a number of skills related to project management; business management; design & technology; design management, and; client relationship management. These include matters such as managing relationships, dealing with legislation, financial control and risk, as well as more conventional project management and technical matters. The ability to source labour and work from anywhere in the world is another key competence.

24

IFF Research Ltd., East of England Skills for Energy, DTI/LSC/ECITB/Energy and Utility Skills/SEMTA, 2004

9

Table 1.1:

Occupations in the contracting industry

Off-site occupations

On-site occupations

Managerial staff

Managerial staff

Professional technologists

engineers,

scientists

and

Professional technologists

engineers,

Incorporated engineers, engineering technicians, and business technicians

Supervisors

Administrative and professional staff

Incorporated engineers

Clerks, office machine operatives, secretaries, and typists

Electrical technicians

Supervisors (supervisory management)

Instrument technicians

Craftpersons

Mechanical technicians

Other employees

Process technicians

scientists

Maintenance technicians Other technicians Pipefitters Platers Mechanical fitters Erectors and riggers Welders Scaffolders Electricians NDT personnel Thermal insulators Non-destructive testers (operatives) Crane drivers Forklift drivers Insulators and sheet metal workers Architectural outfitters Shotblasters, painters, and deck screeders Asbestos removers Fireproofers Industrial cleaners and LSA operatives Production process operatives Mates/semi-skilled personnel Source: ECITB

10

and

1.6 Skills supply White, middle aged men, working in full-time jobs, best describes the principal characteristics of the workforce, although a number of these are working on short-term temporary contracts. For instance, (in certain parts of the sector) just 3 per cent of the workforce are women, and 2 per cent are from ethnic minorities. It is apparent from the data, as revealed in the incidence of recruitment problems, that the industry cannot replenish its workforce from its existing sources of supply. The traditional source of supply is dwindling because: • demographic trends reveal, other things being equal, a dwindling supply of young, labour market entrants over the next twenty years; •

within the falling number of young people the percentage studying science, engineering and technical (SET) courses, from which the industry has traditionally recruited, is falling;

•

young people prefer to pursue opportunities in other industries.

MRM Solutions (2004) suggest that the falling inflows of new labour and the increasing average age of the workforce will conspire to reduce the overall pool of labour available. Although efforts to improve the image may slow this decline it is unlikely that the sector will be able to compete with other more popular sectors. Yet it requires a supply of work ready and highly skilled graduates able to move into design and management positions, who understand client issues and can employ new technology and methods to increase the performance of both contracting and client sectors. As mentioned above, the attraction of well paid employment in more hazardous parts of the world may divert the existing stock of labour abroad, thereby exacerbating further problems relating to domestic labour supply. Moreover, some of the skills in possession of the contracting workforce are transferable to other industries such as construction, the health service, etc. where the demand for skilled labour is high. The problem is not that there are not suitable candidates with relevant qualifications and experience. Globalisation puts a squeeze on pay. The UK is expensive by international standards (affecting competitiveness, especially give the current high exchange rate for the pound), yet the pay on offer for many jobs is not sufficient to attract the best candidates into the Contracting Community since other sectors pay better or have a more attractive image. The latest survey of companies represented by ECITB (as reported in their Sector Workforce Development Plan) emphasises the issue of the increasing age profile which was expected to be one of the biggest problems facing many employers. Rising retirement rates are beginning to decrease the pool of labour available, especially on site. The respondent companies suggest that to address this requires measures to attract younger people into the industry, such as by making school / college visits and raising the profile of the industry so that engineering construction is perceived as a more exciting and interesting career option. However many other sectors are already following such strategies. Williams (2005) in a study for ECITB based on a survey of some key players concludes that importation of skills from overseas was seen to be inevitable. According to his analysis the attitude of much of the existing workforce:

11

“is not conducive to exhortations to greater productivity or any alignment with what is seen as management objectives. The manner in which they are usually employed, i.e. casual, hourly paid and with little expectation of long term employment, is seen to be at the heart of the matter.” Some of the respondents to his survey suggested that one possible solution was the creation of a permanent, highly skilled, flexible core work force, from which greater flexibility and acceptance of the introduction of innovative working practices could be expected, rather than the continued use of temporary contracts as is often the case. Other aspects of supply that have been debated include the role of incentives. Williams (2005) notes that recent bargaining on terms and conditions for the sector has resulted in the introduction of some schemes but many are sceptical about their impact and some have argued that alternative methods (such as working in small teams and the use of non-monetary rewards) may be a more effective means of securing workforce alignment and commitment. The use of temporary employment contracts is quite a common practice in parts of the Contractor Community. Changes in tax rules including the recent interpretation of IR35, will impact on availability of agency workers. Even if there is no change to the contractors’ tax burden, there will be inevitable compliance and monitoring costs. The response of many agency workers to the new rules is also uncertain. Many may chose to retire, some may chose to move overseas, others may push up their wage rates in response to maintain net pay. In any event such changes are likely to only exacerbate the supply situation.

1.7 Skill mismatches Recent research conducted by the ECITB and presented in its 2006 Industry Report (ECITB, 2007) indicates that about three quarters of the companies it represents are currently experiencing some kinds of skills shortages. Over half indicated particular skills problems for managers, business leaders and supervisors. This rises to 70% experiencing problems for professional engineers, technicians and craft occupations. The respondents anticipate that skill requirements for on-site craft occupations will rise over the next decade with over 60% expecting that mechanical fitters and engineering construction electricians will be in especially high demand. The problems can vary significantly in different geographical areas. Available evidence for the East of England, for the energy industry generally, suggests that labour demand is outstripping labour supply even though overall demand might be falling. Data for 2002 revealed that around 30 per cent of engineering employers reported hard-to-fill vacancies over the previous 12 months – up to 45 per cent in the north Norfolk area in the oil and gas industry in 2000. Recruitment difficulties were concentrated amongst technicians and skill trades: • control and instrument engineers; • electrical and electricity generation technicians and engineers; • structural engineers; • managers; • supervisory staff (NQF level 3); • production staff; • mechanical/electrical fitters.

12

Shortages of these staff were damaging businesses.25 ECITB data indicates that skillshortages and skill gaps ranged across a number of managerial, professional, and skilled trades occupations. The study by MRM Solutions (2004) emphasises the crucial importance of high level management and professional skills. Multi-skilling is needed across all types of employee, allowing for use of new construction methods and technologies, as well as new types of contracts and relationships with clients. This requires new skills in management in particular, to manage projects and relationships with clients, including contractual and financial matters (such as project funding and exchange rate movements), as well as the actual work on site. Managers and professionals need a greater focus on achieving the clients’ business objectives. Many foreign competitors have close links with banks and finance houses giving them a great advantage in offering whole business solutions to clients. 26 The review by Williams (2005) emphasises that the key skill gaps relate to site management and construction planning and on site supervisors. The quality of the construction planning skills and the ability to administer the plans are crucial to productivity. Similarly site supervisors play a key role in maintaining productivity levels but under current working arrangements many of them have little incentive to do it. Site supervision is not recognised as a profession. Supervisors are typically engaged only for the duration of the job and rarely integrated into the management structure. In many respects the characteristics of the mismatch between supply and demand are comparable to those experienced by the construction industry in the 1980s/early 1990s in the UK. Uncertain levels of demand led to fluctuating employment levels that in turn made it difficult to plan, and resource and train labour.27 It is not simply an issue of labour supply – in any case the Contracting Community has a relatively strong training infrastructure in place (including the role of ECITB) – rather it is persuading people to remain in an industry when there are either greater certainties of employment in other sectors where their skills are applicable or higher rewards working abroad. This in turn transmits a strong labour market signal to potential entrants, especially young people. Geographical mobility is also an issue, although many people work outside their region of residence according to ECITB data.28 Although the majority of the companies tend to carry out work locally, many work outside their own region and some (of course) do work overseas. Volatility of work levels is also a crucial issue. Employment levels for particular companies on site can vary hugely from one year to the next. This can mean that people drop out of the sector as work dries up. Training plans need to recognise the potential for bringing such people back into the community.

25 26 27

28

IFF Research Ltd, op cit DTI op cit. Sir John Egan (1998), Rethinking Construction: The Report of the Construction Task Force ECITB (2003) Sector Workforce Development Plan.

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1.8 Assessment of future prospects from existing research The DTI (2001) report on the UK’s oil and gas contracting industry highlights the volatility of activity in the contracting sector and the problems in predicting future levels of activity. This is compounded by the uncertainties associated with the competitive bidding for projects and the impact of exchange rate fluctuations. The UK Contractor Community is also part of a much wider global business in which the main players are large multinational operators. Work is often allocated on the basis of expertise, work-load, geography, client preference, etc. The factors which make the UK a favoured place for the contractors to undertake work include the UK’s highly skilled workforce (unmatched in process engineering expertise) and a supportive business climate. Given the concerns about the ageing and declining workforce the first of these advantages may be under threat. From a client perspective, major investments are planned in many sectors, and investment in the existing plant will be needed to meet tighter environmental and product specifications. In other areas (such as nuclear plant) decommissioning is likely to be significant. But making precise predictions is notoriously difficult. In its Sector Workforce Development Plan, ECITB reports on the results of a survey of its member companies about their perceptions of future prospects. When asked about future work types for the Engineering Construction sector over the next 5 to 10 years, respondents confirmed that the trend towards more repair and maintenance and decommissioning work is expected to continue. At that time, the overall workload was expected by some to decline and a number of contractors mentioned the importance of gaining work in overseas markets. According to MRM Solutions (2004), it was unlikely that the Engineering Construction Industry would employ as many people as it did at that time. The decline of the UK heavy manufacturing sector is reducing the demand for plant. This is forcing many contractors to look abroad to places like China for both work and the labour to deliver that work. Regarding skills issues, within the MRM report the most commonly identified problem was thought to be the lack of craft level workers although some respondents mentioned that not enough graduates were being attracted and that technicians and engineers involved with design and project control were also potential problem areas. Rising average age profiles of current craft workers and the difficulties of attracting young entrants into the industry were also frequently mentioned. The focus on craft level skills may be misplaced. The study by MRM Solutions (2004), as well as the reports by Williams (2005) and DTI (2001), suggests that that the real problem is at a higher level, with lack of competences amongst managers and professionals to plan, design and manage projects, as well as managing relationships with clients and dealing with financial matters. These are examples of the kinds of latent skill gaps identified in Wilson and Hogarth (2002). When asked about the kinds of actions that need to be taken to address the problems they anticipate the main emphasis is again on the craft level (training of apprentices), together with measures to make sure they stay in the industry. This includes support for promotion to encourage graduates and others into engineering construction compared to other industries. The expectation is that this should be financed by government (or ECITB), although the need for a partnership approach is recognised. Companies also argued for more multi-skilled engineering construction workers and more localised training and in-house training. 14

1.9 Conclusions from previous research The available evidence, drawn from a number of sectors in which contracting companies are engaged, provides a good deal of information about the problems facing contractors and the implications for the contractor workforce. However, it is not possible from previous research to report with any degree of certainty how many people are employed currently, in which occupations, and what the trend has been over time in the Contractor Community as a whole. So whilst certain problems are considered by various authors to be substantial across a number of sectors, it is difficult to be precise about the scale of those problems for the contractor workforce. The literature provides many insights into the challenges facing the contractor workforce – although this often has to be pieced together from data obtained from a number of different sectors – but provides little indication of the magnitude of those challenges for the Contracting Community and its workforce. This emphasises the need for new research that considers the contractor workforce as a distinct entity in its own right rather than it forming an often indistinguishable part of the oil, gas, marine, water, electricity, and nuclear industries respectively. This is especially so given the importance attached to contractors in Cogent’s Skill Needs Assessment (May 2006). The aims of the present project were to try to fill this gap.

15

2

The current position: value and use of existing data

2.1 The value of existing data from official sources At the start of the project it was envisaged that it would be possible to use existing official data to develop quantitative profiles and models for the Contracting Community. This section focuses on the scope for using such data from official sources to develop such profiles and models. This involved exploring the demography of the workforce and its skills profile, by sector and occupation (disciplines) using data from the Labour Force Survey (LFS), the Annual Business Inquiry (ABI) and other sources. A key objective was to assess the value of such data to produce a quantitative stock flow projection model of skills demand covering all disciplines. Extensive analysis of official data sources such as the ABI and the LFS were undertaken with these objectives in mind. Unfortunately, the conclusion was that official data from such sources are of limited value in developing a robust Stock Flow Model for this particular group. However, the review did suggest that there was an alternative source of data that did have potential, namely that collected by ECITB under its statutory powers, which guarantee a representative set of estimates for the groups in question. The remainder of this section sets out (briefly) the reasons for reaching the first rather negative conclusion, as well as outlining the potential for an alternative approach to building a quantitative Stock Flow Model based on the use of ECITB data.

2.2 Defining the Contracting Community In an exercise of this kind it is important to agree a precise definition of the workforce of interest. It is critical to the success of the study that the Contracting Community, and the disciplines (occupations/skills) within this population are clearly and unambiguously defined. However, this proved to be much easier said than done. The official method of classifying such activity relies upon the Standard Industrial Classification (SIC) and Standard Occupational Classification (SOC). These provide detailed codes to be used when allocating employment to sectors or occupations respectively. These systems of classification are at the heart of primary data sources such as the LFS and ABI, as well as secondary sources such as Working Futures. Following detailed discussions with the project Steering Group agreement was reached on those sectors and occupations that were regarded as “in scope”. These are set out in Tables 2.1 and 2.2. It was recognised that, by themselves, SIC categories will never map precisely to the desired group of ‘contracting organisations serving or able to serve the relevant industries’. Nor will SOC necessarily provide a perfect description of the disciplines

16

required. This exercise was seen as an attempt to agree the best fit possible, using existing data. However it is much easier to agree on what might be part of the “Contracting Community” footprint than deciding whether or not everyone in that category was actually part of that community. It is clear that even where SIC and SOC codes can be agreed as relevant, it is often only some small part that is directly relevant. Unfortunately there is rarely any robust data, nor a consensus on the correct proportions involved. The SIC/SOC footprints provided by ECITB also included some information on the number of companies in these categories regarded as “in scope” to ECITB. This is considerably fewer than the total number in the population for some SIC categories. Unfortunately SIC codes are far too wide-ranging to focus just upon those activities regarded as within the Contracting Community. These represent only a small fraction of the total number of companies covered in the ABI data. This raises a more general issue about precisely what is meant by the Contracting Community. In many cases the workforce of interest is sub-contracted from small parts of other (often very large) companies whose main activities may not lie within the SIC footprint defined by ECITB. This makes identifying those involved difficult and also raises significant problems of possible overlaps and double counting. Not all employees in such a company that is subcontracted to do some relevant work can be regarded as part of the Contracting Community. Many may be involved in quite different activities (e.g general construction work). In many respects this is the key issue. It is clear from the review that was conducted that official datasets offer few if any clues to providing an answer to this problem.

17

Table 2.1: Coverage by Standard Industrial Classification

CY06 Standard Industrial Classification of Economic Activities Source:

Central Statistical Office

Date:

1992

SIC 1992

SIC titles

11.2

Service industries incidental to oil and gas extraction excluding surveying

28.11

Manufacture of metal structures and parts of structures

28.21

Manufacture of tanks, reservoirs and containers of metal

28.3

Manufacture of steam generators, except central heating and hot water boilers

28.52

General mechanical engineering Manufacture of engines and turbines except aircraft, vehicle and cycle

29.11

engines

29.12

Manufacture of pumps and compressors

29.21

Manufacture of furnaces and furnace burners

29.22

Manufacture of lifting and handling equipment

29.23

Manufacture of non-domestic cooling and ventilation equipment

31.1

Manufacture of electric motors, generators and transformers

33.3

Manufacture of industrial process control equipment

40.1

Production and distribution of electricity

45.11

Demolition and wrecking of buildings; earth moving

45.2

Building of complete constructions or parts thereof; civil engineering

45.21

General construction of buildings and civil engineering works

45.22

Erection of roof covering and frames

45.25

Other construction work involving special trades

45.32

Insulation work activities

71.32

Renting of construction and civil engineering machinery and equipment

74.2

Architectural and engineering activities and related technical consultancy

74.3

Technical testing and analysis

74.5

Labour recruitment and provision of personnel

74.7

Industrial cleaning

90

Sewage and refuse disposal, sanitation and similar activities

Notes: Relevant codes as agreed with ECITB. The Contracting Community can be expected to be a subset of employment in these SIC categories. However in most cases it will only account for a small proportion of such employment.

18

Table 2.2: Coverage by Standard Occupational Classification CY06 Standard Occupational Classification Source: Date: SOC 2000

The Office For National Statistics 2000

1121 1122 1123 1141

SOC titles Production, works and maintenance managers Managers in construction Managers in mining & energy Quality assurance managers

2121 2122 2123 2124 2125 2126 2127 2128 2129 3111 3112 3113 3114 3115

Civil engineers Mechanical engineers Electrical engineers Electronics engineers Chemical engineers Design & development engineers Production & process engineers Planning & quality control engineers Engineering professionals n.e.c Laboratory technicians Electrical/electronics technicians Engineering technicians Building & civil engineering technicians Quality assurance technicians

3119 3122 5213 5214 5215 5216 5221

Science & engineering technicians n.e.c. Draughtspersons Sheet metal workers Metal plate workers, shipwrights, riveters Welding trades Pipefitters Metal machining & setter-operators Metal working production & maintenance fitters Electricians, electrical fitters Electrical/electronics engineers n.e.c. Steel erectors Plumbers, heating and ventilating engineers Chemical & related process operatives Energy plant operatives Riggers Thermal insulators Crane drivers Forklift drivers Industrial Cleaning Process Occupations Slingers

5223 5241 5249 5311 5314 8114 8124 8141 8149 8221 8222 9132 9141

ECITB Occupation managerial staff managerial staff managerial staff professional engineers; scientists; supervisors; technologists Ditto Ditto Ditto Ditto Ditto Ditto Ditto Ditto electrical technicians Incorporated engineers NDT personnel instrument technicians; mechanical technicians; process technicians; maintenance technicians; other technicians

platers; insulators & sheet metal workers welders (coded & other); architectural outfitters pipefitters

mechanical fitters electricians erectors; asbestos removers fireproofers production process operatives riggers Shotblasters,painters & deck screeders Crane drivers Forklift drivers Industrial cleaners & LSA operatives

Notes: Relevant codes as agreed with ECITB. The Contractor Community can be expected to be a subset of employment in these SOC categories. However in most cases it will only account for a small proportion of such employment. It may also include some other occupations employed in companies whose prime activities lie within the Contracting Community footprint.

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2.3 Limitations of the Official Data Sources A detailed analysis of the main official datasets was conducted, using the agreed SIC and SOC codes as set out in Tables 2.1 and 2.2. The data sets covered included the ABI (which contains detailed Sectoral information but no data on self employment), and the LFS (which includes data on self employment, occupation, and qualification). Other primary and secondary data sources were also explored in detail including: Working Futures; the SSDA Sector Skills Matrix; the National Employer Skills Surveys; and results from SSCs and other stakeholders. In principle, the ABI and LFS data sets enable a detailed set of quantitative statistical profiles of each of the main sub-sectors and disciplines to be developed. In practice, • either the sample numbers involved turned out to be too small to be useful (e.g. much of the LFS analysis);29 • or the categories were too broad, encompassing many people who are not part of the Contracting Community (much of the ABI based analysis). Without detailed and precise information about the quite small shares of some of these SIC totals that are “in scope”, the ABI can offer very little help in identifying the population of interest. Similarly, it is clear that the coverage of most occupational estimates in the LFS goes well beyond the scope of this study. Although many of the occupational categories identified are of some relevance, the vast majority of those covered are employed outside the Contracting Community which is the focus of this study. To identify the subset of those within the sample that are relevant requires estimates of: a. the sub-sector of interest; b. the proportion of that sub-sector in scope. By cross-classifying the LFS occupational data by both industry and occupation a more precise cut can be made that approaches (a). However, this will still include many individuals outside the fairly narrow scope of the study (i.e. it is not weighted by (b)). Even at this level there are huge numbers of empty cells, while many others are filled with small numbers well below the minimum cut-off point for obtaining robust estimates recommended by ONS (of 10,000). Those cells that do contain robust estimates are for categories which contain a vast majority of cases which are self-evidently not “in scope”. These problems are exacerbated enormously, if an attempt is made to further cut the data by status, qualification, age or geographical location. Some of these dimensions are critical to meet the objectives of developing the skills profiles and the stock flow model.

29

Combining samples across years did not prove to be an adequate solution to try to minimise problems of inadequate sample sizes in the LFS. In many cases cells are simply empty. This does not mean that no one is employed in that category in the population as a whole, just that the LFS sample is not sufficiently large to provide a fully representative picture. In principle, the employee numbers from the LFS should match the ABI data. In practice, they are often very different, calling into further question the reliability of the data, even at a quite high level of aggregation.

20

Even if a number of LFS samples are combined the cell sizes remain too small for robust estimates of the key indicators required to be obtained. It is clear therefore that practical problems of data availability and quality severely limit what can be achieved using official data. Without either much larger sample sizes or some robust means of distinguishing those within the Contractor Community from those without, such information is of little value. Similar problems apply to most of the other data sources mentioned above, including Working Futures and the National Employer Skills Survey (NESS). Data available from various stakeholders, including SSCs and other national training organisations was also considered. In some cases this also proved to be a dead end. For example, although ConstructionSkills was kind enough to supply data, this proved to be too aggregate to identify the population of interest here. Similarly, the information available from Energy & Utility Skills was too general to be of use, encompassing many people outside the Contractor Community. However, it is clear that some useful data are available, notably the information collected by ECITB under its Statutory Returns, and some additional information provided via COGENT on the nuclear industry and on the refining sector, and by SEMTA on the shipbuilding and marine sector. ECITB has good information on those companies within in its scope via its Statutory Returns. However, these have changed over the years and some information is no longer collected, introducing some discontinuities, so establishing consistent time series is less than straightforward. These data are described in more detail below. In particular the ECITB data are regarded as the key to the successful identification of the population of interest and are regarded as the prime source of data for developing useful stock flow models and projections, although as noted below they too have their limitations.

2.4 Identifying the Population of Interest The key problem is to identify the small subset of the workforce that falls within the footprints of the stakeholders that contain the contactors of interest. Given the problems with the official data sources, it is clear that it is necessary to draw upon data from stakeholders in order to take the project forward. Detailed discussions with ECITB suggested that their database could, in principle, provide many of the data required. Detailed discussion also suggested that all of those covered in the ECITB database should be included in the scope of this study. A request to ECITB was therefore made to get access to their database. ECITB kindly agreed to support the project by interrogating their database to extract time series information on employment by region, occupation and various other dimensions. This information provides the core data set used to build the Stock Flow Model described in Section 4. Ideally, the ECITB data need to be supplemented by information on those categories not fully represented by ECITB. However, in practice it has proven very difficult to reconcile the data from ECITB with those from other sources, many of which suffer from the same

21

kinds of problems already identified for the official data sets (i.e. including many people outside the Contracting Community). While there is general agreement that the Contracting Community extends beyond the footprint covered by ECITB, there is little consensus on by how far. The Contracting Community falls in part within the footprint of some other sectors, including COGENT, EU Skills and SEMTA. Figure 2.1 highlights the issue schematically. It illustrates the overlaps between the various stakeholders. For simplicity it focuses on just the main stakeholders (e.g. ConstructionSkills is ignored). Figure 2.1: Identifying the Contracting Community

ECITB SEMTA Contractor Community

COGENT EUskills

Notes: Not to scale. The Contracting Community is assumed here to subsume the full ECITB footprint.

22

The main components in the full Contracting Community footprint are as follows: ECITB Engineering construction industry: The total ECITB employment footprint in 2006 was around 66,000, all of which appears to be relevant to this project (i.e. part of the Contracting Community). There are around 34,500 in the on-site workforce, plus a further 31,500 in design and management functions in head offices, etc. This compares with a simple SIC based footprint, using ABI or LFS data of around 2½ million, using the definition set out in Tables 2.1 and 2.2. But this contains huge overlaps with construction and other sectors that go well beyond the Contractor Community which is the focus of this project. ECITB’s own estimate of its footprint is only some 2½% of the crude SIC based footprint. The ECITB data also covers a number of those employees identified below (for example, those working on nuclear sites, in chemical plant or oil refining). It is necessary to take this into account when trying to reach any overview of the amount that the basic ECITB estimates need to be “boosted” to allow for any additional employment.30 In the current version of the model this is done by a simple pro rata expansion of the basic ECITB numbers. In practice, this may not be appropriate, but in the absence of any firm data it is a reasonable starting point. Given better data a more realistic set of “boost factors” distinguished by sub-sector might be feasible. COGENT Nuclear industry: Total employment here is estimated by COGENT as around 40-45 thousand, but not all of these are “in scope” as far as this project is concerned. It is possible that the relevant part of the work force may be entirely covered within the ECITB estimates (in which case no addition is necessary). However, in 2006 the ECITB estimates suggest a figure of around two thousand in the Contracting Community. This suggests that some boosting may be appropriate to cover elements not included in the ECITB data. However this remains to be quantified with any precision. Chemical & oil refineries: The DTI (2001) study suggested a total footprint here of around 10 thousand “on-site”, plus 10 thousand support staff. In 2006, the ECITB estimates suggest a much smaller total of only around three thousand “on-site”. This suggests that the figures for this sub-sector may need “boosting” quite significantly. However, as with the nuclear industry, there is considerable uncertainty on the possible scale of any additional elements to be added. Other Offshore work: It is not clear if the DTI study covers all offshore work. This is covered in some ECITB estimates but not all. Energy & Utility Skills The total, Energy & Utility Skills (EU Skills) employment footprint is some 460,000. The key issue here is what proportion of this total is relevant to this project. The great

30

In principle, the Statutory Act which underlies ECITB’s levy is designed to remove any overlap with employment covered by other bodies such as Cogent and SEMTA. A company is either inscope to the ECITB as defined by the Act, or not. The Scope Order itself - by necessity of levy collection removes any overlap. The determining factor is whether the company is wholly or mainly engaged in ECI activities. However, as noted, many do try and argue the case and in practice it is not always so easy to draw sharp boundaries in the activities of companies operating in these areas.

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majority of it is not “in scope” to this research. Those elements that are in scope to this study are probably covered by ECITB (the relevant parts of EU Skills that should be included relate to work on: Gas plant; Electricity plant; Water plant; and Recycling plant). This includes on-site building and maintenance work. But note that some contractors doing such work would not be included as “in scope” for ECITB, (unless they spend less than 50% of their time on such work). Such workforces should be represented in some fashion. SEMTA Engineering, including ship building The overall SEMTA footprint is very large and probably covers all the SIC categories that overall represents ECITB, but not specifically engineering construction activities (as stated by the Levy Order). The main additional item to note is the shipbuilding and marine engineering sector, which in total now only amounts to around 5,000 employees, but not all of this is part of the Contactor Community. Again the key issue is to identify anyone not covered by the ECITB database. Although the shipbuilding and marine sector belongs within the SEMTA footprint, there may be some workers in module yards working on projects for the offshore industries that ought to be added in. Many of these people were previously employed in the traditional shipbuilding sector. However obtaining robust estimates of these may not be possible. ConstructionSkills Again this SSC has a very large footprint (almost 2 million) but the vast majority of its workforce are not “in scope” to this study. In general, no “boost” is therefore needed One exception may be some scaffolders that are employed by companies mainly operating in the specialised scaffolding business, who are providing such services as part of the Contracting Community. However some scaffolders who are employed by companies that are mainly engaged in engineering construction are covered (at least in part) by the ECITB data. Other Areas of employment In the Nuclear industry and some other areas there is a key requirement for nondestructive testers. These normally are allocated to SIC 73/74. The numbers involved are small but they are often critical, with very specific skills. Some inspectors also fall into a similar category. Engineering Construction Industry association (ECIA) While this is not entirely in scope to this study it covers some contractors who are not represented by ECITB, including categories such as scaffolders employed by companies whose prime activity is scaffolding and who are represented by ConstructionSkills. Overall Boost factors In preparing the estimates used in the Stock Flow Model to represent the whole of the Contracting Community the ECITB data have been “boosted” to take into account the considerations set out above. This is based on judgements about the net impact of all the above elements. The “boosting” has been done on a pro rata basis, distinguishing between on- and off-site only, with no attempt to distinguish between sub-sectors or occupations. This reflects lack of more detailed data on how these factors may vary across sub-sectors rather than any belief that there are no differences. The overall “boost factors” currently used are set out in Table 2.3 below. These factors are intended to cover all the areas outlined above.

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Table 2.3: “Boost Factors” applied to ECITB data (2005) Category

% boost factors

000s

On-site occupations

1.294

6,255

Off-site occupations

1.483

10,592

Un-weighted average / Total

1.389

16,847

Source: ECITB TimeSeriesOverview.xls. Notes: Factors applied pro rata to all sub-sector and occupations. The overall ECITB footprint in 2006 was around 66,000 people employed in total.

2.5 Data to build a Stock Flow Model This review suggests that the use of official data from official sources cannot provide the information needed to build the discipline profiles and Stock Flow Model required. However, data from key stakeholders, notably ECITB, can help to fill this gap, although there are still significant issues of coverage and overlap to be addressed. More qualitative material drawn from the literature review, as well as some new primary data collection can be used to supplement the available quantitative data where it is weak and to address concerns about lack of coverage. To confirm the robustness of these data and assumptions, both in terms of the overall scale of employment in the Contracting Community and the structure of the workforce (occupational mix, qualification profile and age structures) both clients and contractors were interviewed to attempt to validate some of the conclusions reached based on the data reviewed here. This process is described in more detail in Section 3.

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3.

Perceptions of the Contractor Community

3.1 Aims of the qualitative research To complement the quantitative analysis the project also involved qualitative research, including in-depth interviews with key members of the Contracting Community. One of the aims of the interviews was to undertake primary data collection of a more qualitative nature in order to fill in the some of the gaps identified in the review of previous research and existing data available from official sources set out in Section 2. In-depth interviews were used rather than a survey approach. The hope was that this information could also be used to validate the basic Stock Flow Model data (and related assumptions) and to try to ensure that they were robust and representative. A prime focus of the interviews was therefore on the overall scale of employment in the Contracting Community, the structure of the workforce (especially occupational mix), and the future (scale, patterns and prospects). Companies at the top of the supply chain (the client group) were contacted to confirm the initial findings based on the initial stock flow model. The aim was to obtain an initial check on the scale and type of engineering/construction activities they let or sub-contract and how this compares to the initial stock flow model based estimates. In this way a qualitative picture was developed about the number of contractors as well as the scale of their activities. The client group was also asked to provide additional information about whether various activities are subcontracted and to whom. A subset of contractors was also contacted to ascertain in more detail information about their workforces. The aim was to get reasonably robust information on the key patterns, and orders of magnitude, rather than precise numbers. The participants were presented with a few stylized facts based on the stock flow model and then asked to make judgements about the scale of any amendments required to get a more comprehensive and representative picture. This focused on the three key elements: overall scale/size of the Contracting Community; structure in terms of skill requirements (discipline profiles, especially occupations), and future prospects (key features of expected future changes including replacement needs). The design of the structured interview and the particular questions to be included therein was aimed at achieving this end.

The Discussions with Clients and Contractors The remainder of this section summarises the main findings emerging from the in-depth interviews conducted with 8 client and 17 contractor companies. The interviews sought to: • test some of the findings from the review of ECITB and other data on the size and occupational profile of the workforce within the Contracting Community; • gain insights into the nature of the contracting workforce, albeit from a relatively small number of interviews; • examine current difficulties regarding recruitment and skills; and • examine the views of clients regarding the ability of the Contracting Community to meet current and future demand.

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It is important to note that the data collected are from a relatively small number of employers, and are therefore best treated as indicative only. Annex A provides more details of the methodology employed. The remainder of this section of the report is structured as follows: 3.2 3.3 3.4 3.5 3.6 3.7

The profile of respondent companies; Client use of contractor companies; Views on size and occupational structure of the contracting; Current supply and demand of labour, skills shortages and labour market issues; The anticipated level of future demand for contractor staff; Trends, issues and implications.

3.2 Profile of Respondent Companies Client companies Eight client companies were interviewed covering: • three in the nuclear industry (two mainly involved in decommissioning); • two in the petrochemicals industry (manufacture, storage and distribution); • an oil refinery and terminal; • one in the energy sector, mainly electricity generation and distribution through over half a dozen power stations and many more wind farms, and also with gas storage facilities); • a pharmaceuticals manufacturer. The client companies were very large in terms of the number of staff employed directly and the number of staff working for them via contractor companies. Examples included: • • •

an oil refinery with 550 staff directly employed and anything from 750 – 2,700 contractor staff; a petrochemicals manufacturer, with 850 staff directly employed and typically 1,000 contractors, rising to 2,000-2,500 contractor staff at peak activity; a nuclear power station with approximately 1,000 directly employed staff and 1,000 contractors.

Contractor companies In total 17 contractor companies were interviewed across the UK. These covered a wide spread in terms of their turnover, staff levels, area of activity, and the client industries they serve. These included: •

• •

six contractors operating as full service providers, offering everything from frontend engineering design, procurement and project management, to implementation in capital build, maintenance and decommissioning, and delivering turn-key solutions to a variety of clients in all relevant sectors; five companies providing very specialised solutions, such as inspection and testing, to particular needs in multiple sectors; six companies serving particular sectors (3 in oil, 2 in nuclear, 1 thermal power) with a range of services and solutions.

The contractors vary considerably in terms of employment levels and operational reach, including both large international organisations and smaller domestic niche providers.

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• • • •

the large multi-sector and full-service contractors employed between 6,000 and 28,000 staff worldwide and 300 to 5,500 in the UK; also large are the oil contractors, one nuclear and the thermal power contractor, who report around 20,000 staff globally and between 500 and 7,500 staff in the UK; the specialised service providers for multiple sectors figure somewhere in the middle, typically employing 200 to 1,000 personnel worldwide, and 450-750 staff domestically; finally, niche market operators with a very specialised services portfolio tend to have very small numbers of staff, between 12 and 200 in our sample.

3.3 Client use of contractor companies Client use of contractors was extensive. One client described taking over an oil refinery where 600 contracts with different suppliers were in place, though of these 40 were described as important and a dozen vital. Another had 60-70 contractor organisations in place for the building of a new gas facility. Another used 50-60 contractors. Functionally contractors were being used for a very wide variety of roles which essentially covered all areas of client activity. These included: • • • • • • • • • • • • • • •

Project management; Facilities management and maintenance; Decommissioning; Mechanical, electrical, civil, control and instrumentation, commissioning and safety engineering; Control and instrumentation technicians, and mechanical fitters; Radiological protection; ADR drivers; Scaffolding; Electrical installation; Pipefitters; Painters; NDT technicians; Steel erectors; Fabricators; Link sealing.

There were different approaches being adopted on the use of contractors. Some clients use contractors when there is not enough expertise in-house to undertake specific tasks and where training in-house staff would be too costly or take too long. An example was a client using contractors in such areas as scaffolding, radiological protection, electrical installation, project management and facilities management. For others it was more wholesale, and a new build division of a major client, for example, had an in-house team of 30 project managers overseeing the new build and repair and maintenance work which was all carried out by contractors. Another kept what they saw as the key strategic functions in-house, with everything else contracted out. They retained managerial and some engineering functions to enable them to analyse technical needs and priorities at their sites, to retain in-depth knowledge of key machinery on-site, and to keep in-house proprietary know how so that these could be retained and developed.

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3.4 Views on size and occupational structure of the Contracting Community Respondents were asked spontaneously to estimate how many staff they believed worked in the Contracting Community, before then being asked their reaction to estimates derived by IER from various data sources (including ECITB data) suggesting the overall scale is around 30-35,000 workers “on-site”, plus another 25-30,000 working off-site in head offices. Clients Spontaneously, most clients admitted to having no or little idea of the number of staff employed by contractors in the energy and chemicals sector in the UK. Only two made estimates: one suggested the figure was closer to one million and the other suggested 400,000. Such views appear to relate more to the size of the client group than the contractor workforce. When presented with the IER estimates, while two clients felt these might be about right (and one felt unable to comment), the general feeling was that the figures were too low, and for three far too low (not surprisingly this included the two answering spontaneously). A number commented specifically that they felt that the number of onsite workers and / or the ratio of on-site workers to off-site workers seemed too low: one for example felt the on-site figure presented may be around three quarters of the actual number. Given that clients generally felt uncertain about the approximate overall numbers employed by contractors, few felt able to comment on the occupational structure of the contractor workforce as a whole, though one did provide estimates specifically for the nuclear industry. Contractors As with client companies, a large proportion of respondents simply could not comment on how many people were employed in the Contracting Community overall. Those who did venture an estimate to the unprompted question put the total number of staff at 61,000 on average, though this ranged from 20,000 to 150,000. The prompted question asked respondents to comment on the estimates produced by IER, which defined the scale of employment at 55-65,000 covering both on-site and offsite workers. At this stage, 8 felt the estimates were “about right”, 4 felt them to be “too low” and 3 “too high”. The fact that contractors and client companies struggle to define any precise estimate of overall levels of employment in their own industry clearly reflects the disparate nature of the Contracting Community which serves a large number of sub-sectors, and also the volatile nature of projects characterised by high, short term peaks particularly around shut downs.

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3.5 Current supply and demand of labour and labour market issues Demand for labour and factors affecting the overall demand for labour Among both clients and contractors the shared view is that demand for labour is at a recent high, and is increasing, while the supply of suitable, skilled labour is problematic and will continue to be so, and supply has needed to draw heavily on overseas workers, particularly from Poland. The stock-flow model (discussed in Section 4) includes assumptions about the factors affecting demand for labour within the Contracting Community. To this end clients and contractors were asked about the factors determining industry and their own demand for labour. The key factors mentioned as affecting overall demand, and explaining the high levels of activity, were as follows. •

Government policy and investment, particularly critical in the nuclear sector for new build and decommissioning.

•

Ageing assets, which have increased the volume of repair and maintenance work and also increased capital expenditure to extend the life of existing assets. A typical example was an oil terminal designed to last 30 years currently in its 33rd year.

•

High investment in the energy and chemicals sector globally and regionally. The high price of oil was a major contributory factor in this major investment programme.

•

Green issues and emissions policy. This has led to the need for increased capital investment in some areas to ensure compliance, as well as a push to renewable sources.

•

The slowing down in North Sea oil and gas has led to greater investment in storage and distribution and away from extraction.

The supply of labour Difficulties recruiting suitably skilled staff to meet the high levels of demand is a factor affecting all parts of the industry, and clients and contractors alike. In many cases it was felt to be severe, and there was a consensus that these shortages and recruitment difficulties would become worse as demand increases within the industry. One client spoke of ‘scraping the bottom of the barrel – that’s why we having to so many foreign workers’. Another client involved in decommissioning work considered this sector relatively fortunate: ‘In our sector it’s not very very difficult, only moderately difficult to find skilled workers.’ Similarly virtually all contractors reported difficulties in finding skilled staff, and the number of contractors content with the current pool of candidates is negligible. Skills shortages and hard-to-fill vacancies represent persistent problems throughout the sector. For most contractors this is simply an issue of numbers, i.e. the challenge to find enough staff to run any project, while for some the difficulties lies more in finding good quality candidates or very specialised skills sets for a particular niche in the market.

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A whole range of issues were cited as causing or contributing to the severe labour shortages, including: • an ageing workforce resulting from (depending on how employers look at the issue) young people not wanting to work in the industry or the industry failing to make it appealing to young people. In part this has been fuelled by the industry failing to invest sufficiently in apprenticeships. • competition from other sectors, especially construction and Heathrow Terminal 5. The London Olympics was commonly cited as a concern in terms of reducing the available workforce • increased globalisation of the workforce, and domestic employers can struggle to compete with lucrative overseas work We look at these issues in the following sections. Ageing workforce That there is an ageing workforce in the industry is widely reported and discussed in the literature, though the evidence is somewhat incomplete. The interviews adds further evidence of the phenomenon. All clients were agreed that there is an ageing workforce and that insufficient young people are entering the industry. Most were very concerned about the impact in terms of the loss of skills and the potential impact on output and production. •

One client reported that the average age of contractor staff was 53, and described this as "frightening. I'm scared we're going to have to shut down eventually. We cannot survive on what we have. Output is going to decrease." He reported the additional effect of the Olympics as meaning they may be left with 'Dad's Army again'.

•

“The demographic is skewed towards the over 50s. There are very few aged 2040. Within the outsourced industry over 50% will retire in the next 10 years. There will be a real shortage of trained, skilled staff in the near future, which represents a real and significant risk to the continued operation of this facility.”

•

“There is a huge amount of knowledge and experience we are in danger of losing because no one is coming through…Anyone who has got any get up and go has got up and gone.” The average age of contractor staff was described as being 55, and the respondent was worried about a severe skills and experience shortage in 10 years time. His site was also described as ‘emptying’ because staff could earn double their salaries in nearby Aberdeen.

•

One client blamed the rapidly ageing workforce on contractors failing to invest sufficiently in training and development and attracting sufficient young people to the petrochemicals industry (contractors believe the solution is to go to Poland). He estimated that 70,000 in the chemicals industry are due to retire in the next 10 years.

•

One client commented that the industry has talked about an ageing workforce for 10 years, ‘and now it’s here.’

Contractors confirmed these issues. The average age was described as being around 50, and contractors talk of a “grey industry”. As an extreme example, one company reported its crane drivers to average 63 years.

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“The average age of the workforce in the community is frightening. Currently, the industry has an average employee age of around 52-53 years. Some 20 years ago the average age was around 30 years, but employers did nothing to address what was the obvious effect of cutting training budgets, wholesale elimination of apprentice places etc.“ (Power Generation contractor) More workers are retiring than entering the labour market. One contractor estimated that some 30% of the workforce will retire within the next 10 years, significantly adding to the problem. Another interviewee stated that about 1,000 employees are expected to retire each year over the next 5 years, while the industry only takes on 300 apprentices per year. As a consequence, it is not uncommon that employers hire older staff back from retirement during peak times. One client spoke of having three machinists all of whom are beyond retirement age. “Quality machinist skills, the tool maker type for fine tolerance machining, have pretty much disappeared. If you recruit a mechanical fitter they don’t have the skills.” Many contractors fear an even smaller pool of available labour in the future. “The skill gaps are in the age ranges 30 – 50 years. There are no engineers now because they were not educated in the first place. They don’t exist, within that age range. I have lots of young 30 year olds but there is a gap in the 40 and early 50 year olds.” As well as issues with the number of suitable workers, contractors, like clients, are concerned about serious discontinuities in what traditionally was a two-way knowledge transfer within the existing workforce. In the present scenario younger graduates or apprentices who enter the profession will be less likely to be able to benefit from the experience of more mature employees as these leave the profession into retirement. “If it continues we will lose the knowledge. We have employees in their 60’s with 30 years experience and unless we have targets that are set on imparting knowledge onto the younger generation we will lose it.” By the same token the older employees are losing out on knowledge about new technologies and practices which is thought to be generated or adopted by the younger generations. “The implications of an ageing workforce are manifold, for example, the younger ones don’t have so many experienced engineers around who could pass on their knowledge. The age difference also translates into a skills gap with respect to new technology, but this time to the detriment of the older engineers, because they miss out on a lot of new stuff and new ideas from the younger generation. “ When asked in which occupational categories there were particular problems of an ageing workforce and where there would be difficulties replacing those retiring, it was usual for respondents to refer to nearly all the areas where they employed skilled staff. Just three examples from clients show that this is not a problem confined to specific occupational groups.

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1. Managers; professional engineers; incorporated engineers; electrical technicians, instrument technicians; electricians, pipefitters; erectors; asbestos removers. 2. While reporting no issues with off-site staff, this client reported the ageing issue as particularly affecting: electrical technicians; instrument technicians; mechanical technicians; maintenance technicians; insulators and sheet metal workers; welders; forklift drivers; industrial cleaners. 3. Professional engineers both off- and on-site, and on-site: electrical technicians; mechanical technicians; maintenance technicians; production process operatives. Low interest in working in the sector among young people Clients and contractors alike pointed out the shortage of young people entering the industry, both in terms of fewer people taking engineering related subjects at university and fewer interested in apprenticeships. Respondents attribute this decline in new talent to various factors. First of all, there is a recognition among contractors themselves that in the last 10 years there has been a lack of apprentice places and investment in training that made the sector unappealing to youngsters. But the government is also held to be partly responsible. ”The whole country shut down apprenticeships.” [Contractor] “The industry is reaping the costs of the last ten years when it failed to invest in people and many people left the industry.” [Contractor] “We try very hard to recruit younger candidates. But there has been no investment from the government and no incentive for young people to take up training and a career in engineering. Also, many young people were discouraged by the very low work stability in this sector.” [Contractor] The availability of apprentice places is now thought to have improved to some extent, thanks in part to support from initiatives like the ECITB TecSkills programme and LSC grants. Others pointed to a perceived shift in attitudes and expectations of young people, who are said not to be interested in engineering anymore or the excitement of “building things”. “Getting enough graduates is a tough situation. Parents want kids to go to university but kids often want to do soft degrees, which are not much use to our industry. Engineering is still a bad word. It lacks kudos versus ‘banker’ or ‘lawyer’.” A fair number of contractors report back on a generational change in attitudes, which is not only reflected in the choice of university degrees, but also in terms of general outlook regarding a working life from the perspective of young people. “It is the working away from home which is the real problem and it is likely to become an even greater problem in the future. It is mainly a quality of life issue, people wanting a better work/life balance today, not being prepared to put up with the working away from home demands etc inherent in the job as their predecessors did. The old and the bald are OK but newcomers to the industry are less pliable.” [Contractor] A client also confirmed this picture of newer engineers being less adaptable and having a different mind set, which is more aspirational thus making them more job mobile (in the switching employer sense rather than the geographic sense). 33

Competition from other sectors and working outside the UK Other industry sectors or geographical locations attracting talent away from the Contracting Community are compounding the current skills shortages. Many skills sets of key contracting workers are transferable to other sectors, particularly construction projects, and a considerable number of contractors lose staff in this way. “Working in other industries can earn you twice as much and when you add to this the Olympics you understand the severity of the problem.” In particular, the 2012 Olympic Games in London and Heathrow Terminal 5 have been mentioned as two “mega projects” draining / likely to drain the supply of engineers, project managers and skilled trades workers. As the contracting business becomes ever more globalised, so too does its labour market. In some cases domestic contractors struggle to compete with attractive offers made by overseas companies or agencies, who often pay better or offer more interesting work. “Sometimes, we hire engineers who say they prefer doing freelance work for us, or for an agency, because it gives them more freedom and excitement. They enjoy hopping around from one off-shore platform in the North Sea to the next one in the Gulf of Mexico, for example, it’s an adventure.” “Employee retention is an equally important challenge. It is really hard to try and hold on to good staff, as the market is so volatile. For example, we might hire a very good design engineer for a month or two, but then he quits and takes on another job in Dubai, which is more exciting and better paid.“ [Contractor] The extent and nature of recruitment difficulties High levels of demand and supply side difficulties have created significant and often severe recruitment difficulties. The list of occupations where clients and contractors are experiencing difficulties finding staff is extensive, and generally simply reflects the full range of occupational categories in which they employ skilled staff, hence covering professional and incorporated engineers and other professionals, the full range of technicians and skilled trades, and project managers and supervisors. Examples provided by clients included the following. •

One was experiencing difficulties finding corrosion, mechanical, electrical, and process engineers, supervisors and electrical, instrument, mechanical and maintenance technicians.

•

Another reported being short for chartered engineers in all disciplines and for technicians having current shortages for mechanical fitters, electricians, and welders.

•

Another reported having difficulties finding staff in all the following occupational categories: professional engineers; incorporated engineers; instrument technicians; mechanical technicians; maintenance technicians; riggers, welders; forklift drivers; industrial cleaners.

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Contractors too, when asked about any particular skill sets and occupations that they may struggle to find, typically responded was that recruitment problems ran “across the board” and affected all levels and all disciplines. “The shortages are across the piece and are restricting the growth of the business.” “For our company, there is no single skills set where we feel comfortable today or confident that we will be able to resource it sufficiently in the future.” Among contractors the most common off-site categories with hard-to-fill vacancies were the managerial and engineering professions and also to a lesser extent supervisors. Onsite staff shortages included managers and engineers, all categories of technician, and the following skilled trades: pipefitters, welders, riggers, platers and mechanical fitters. It is important to note skills shortages are not only a result of lacking numbers, and a number of respondents also complained about the lack of quality in candidates. “The quality generally is not great and does not represent value for money. It’s not going to improve in the short term. The numbers of people entering the industry are slowing and the quality is inadequate. We have many leaving the industry, generally through retirement. There are plenty of people but the quality is an issue” A fair number of contractors were concerned about the difficulty of finding well qualified staff and attributed declining standards to a number of factors: • • • •

falling general standards at universities; inadequate content of existing university courses; disappointing general proficiency of school leavers; poor attitudes of entry level graduates and/or apprentices.

How recruitment difficulties are managed currently A range of responses were adopted by employers in attempting to recruit and retain staff in what many describe now as an employee-led market. These included: • • • • •

recruiting from overseas, particularly Eastern Europe and especially Poland (one client reported having an electrical engineer commute from Bratislava!); using head hunters and more commonly agency workers; recruiting lower standard staff (as one client commented ‘it’s got the stage where we recruit for their attitude rather than their skills’); raising pay and trying to offer flexible working arrangements; announcing plans further in advance to give contractors as much lead in time as possible.

Some of these items are discussed in more detail in the following sections. Reliance on staff from Eastern Europe Clearly many employers in the industry have reacted to the difficulty of finding suitably skilled staff by relying on recruiting from Eastern Europe, particularly Poland. However, many felt this was not a long term solution, and indeed felt over reliance on overseas as posing various dangers for the industry, such as projects being driven out of the UK to countries or centres where the necessary skills are more readily available, and, more generally, the industry being ‘exposed’.

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“I think in 10-15 years time more than 40% of the workforce across the board will be foreign and there will be a natural tipping point from which the British workforce will not recover.” [Contractors] “The shortage of professional staff a real concern given the energy sector’s overall growth plans and forecasts. Filling the gap through foreign labour works in the short term, but it is not a complete solution, and it also raises concerns on culture and safety.” [Client] Examples of the extent of relying on overseas workers included a client who described visiting a power station in Oxford where 90% of the staff were Polish, a client reporting that a contractor brought in 100 Polish welders and a scaffolding contract worth £9m where the client says they will need to go to Poland. To contractors recruiting from overseas was a matter of expediency, and the only immediate solution to meeting high levels of demand and the shortage of skilled staff. In addition, though, the work ethic of these workers was praised. “This year we recruited 150 employees from within the EU, because we simply could not find enough domestic UK staff. This figure is set to treble next year. The government is not making this easy for us, as it can take up to 18 months to secure a working visa.” “The better continental sourced workers are employed as working chargehands. We find that they are generally very adaptive people and have a great work ethic. They are generally very eager to impress, although at times they can be too quick, and then methods are occasionally sacrificed. Initially, they were resistant to integrating with the existing workforce, but this is better today, as the initial suspicions are broken down.” “The Polish labour force will make up the shortfall. In Aberdeen I’ve seen with my own eyes the extent to which the industry relies on Polish workers and to be fair the majority of them are very highly skilled, have a good work ethic, are strong mentally and come from good backgrounds and have a ethos of hard work. They are usually the first ones in on a Monday and are not out getting drunk over the weekend.” “We have to rely on good quality overseas recruitment. The danger of that is they become highly skilled and go back whence they came from.”

Employment agencies Many employers relied heavily on agency staff – amongst contractors the proportion can be between 20% and 80% of the overall workforce – but many felt they exacerbate some of the industry’s labour market difficulties. Agencies represent something of a mixed blessing for contractors and client companies. On the one hand, they provide quick and generally reliable supply of staff which is desperately needed especially for short-term, peak periods of work. On the other hand, many contractors have had negative experiences with agencies, in particular the variable quality of their staff and the perceived lack of value for money. Further problems with agency staff related to the short-term nature of typical engagements, which make it difficult to properly complete projects.

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“One solution we sometimes use is to hire agency staff, but this is more expensive and the quality of candidates is variable, some are excellent but some agency staff are useless.” “In principle, we avoid using agencies whenever possible as they are expensive and they do not always have access to quality people.” “It also becomes difficult to hold on to contract staff in order to complete work, and projects are adversely affected as contract staff move onto their next role within the industry before closing out activities on their current project.” While a typical HR manager is quick to complain of the adverse effects of agency workers to his business, many also concede that for individuals this may be economically the better option. “Many skilled engineers are attracted to short-term agency work because it pays better. When they sign up with an agency, or with several agencies, they can have continuous employment with various contracting companies. So, even though our sector is volatile, the amount of work in our sector is very volatile, people move towards more stability by linking up with an agency.” “People have short termism – they need to see the bigger picture. Too many times people go for the contract work because they can work 6 months of the year for 3 times the salary – and these people are in their 30’s. That’s why there is a skills shortage, and this is why there is an age gap.” Pay rates The fact that there is felt to be an employee led labour market has led to pay rates increasing. “The contracting sector has always been an employer’s market, where companies dictated the terms. But now, thanks to the skills shortages, the pendulum has swung in favour of employees, who can pick and chose their employers and determine work conditions. Also, wages have doubled in the last 4 to 5 years.” [Contractor] “The buoyant market for talent is pushing contract staff rates ever higher and demand is likely to continue to grow in the future with further rate rises highly likely.” [Contractor] “Increasingly employees have decided to move to limited company status to take advantage of a buoyant market for skills, pushing up industry rates.“ [Contractor]

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3.6 The anticipated contractor staff

level

of

future

demand

for

Confirming comments in the literature review (as discussed in Section 1), clients and contractors anticipate demand for contractor staff in the sector over the coming years to be increasing. Examples given by clients for their own forthcoming projects included: £0.7bn of capital investment over the next 5 years; two plants being decommissioned producing work for the next 17-25 years; £150m in contracts for two large construction projects; and ‘significant increase’ in capital expenditure for infrastructure repair projects, and on renewables. Another reported that planned investment in the North East around Teesside in the chemicals industry as being an estimated £3bn to £4bn over the next 10 years. Some clients put figures on this increase in demand in terms of staff numbers needed. One using 600 staff via contractors currently expected this to increase to 1,500 in 3 years time and 2,500 in five years. Another gave an industry wide perspective and felt an extra 15,000 could be needed in the Contracting Community over the next ten years. The demand was generally described as affecting all key occupations that they currently employ and very few respondents isolated just one or two specific occupations where they expected high demand or where they anticipated particular recruitment difficulties, and where this response was given this simply reflected a limited range of employment. Hence it was common for employers to expect future difficulties for ‘all engineers (civil, structural, planning and cost engineers)’, ‘all people skilled in decommissioning, perhaps especially management and supervisors’ or ‘high voltage electrical engineers, control and instrument engineers and technicians, civil engineers, in fact all professional grades.’ It was also noticeable that where high demand or recruitment difficulties were expected in an occupational category it tended to be seen as likely to affect professional and lower level staff in that area. Hence one client anticipated high demand and potential recruitment difficulties in the coming years for waste management and for radiological staff at both professional and manual level (as well as decommissioning technicians, asbestos removers, and professional managers). Another predicted difficulties for instrument, electrical and mechanical professionals and technicians (as well as in fabrication, scaffolders, painters and insulators). Overall the range of occupational categories given by clients and contractors of key occupational groups that will be needed over the next five years included: • all types of engineer (civil, mechanical, structural, cost, planning; control and Instrumentation, and high voltage electrical engineers); • various ‘professionals’ (radiological, waste management, instrumentation, electrical, and mechanical); • Various technician level staff generally covering exactly the same areas as for professional staff (decommissioning, waste management, instrumentation, electrical, mechanical, maintenance, etc); • project managers; • all people skilled in decommissioning, especially at management and supervisory levels, but also technicians; • supervisors; • skilled trades (welders, pipe fitters, electricians, fabrication, ADR drivers);

38

• • •

scaffolders; asbestos removers; painters.

3.7 Trends, issues and implications A key issue for the research is investigating the extent to which the Contracting Community is likely to be able to meet the demands placed on it and the implications if not. We explore some of these issues in this final chapter, as well as other trends in the market place. The ability of the Contracting Community to meet client demand While there is virtually unanimous agreement that demand will increase significantly in the coming years, and hence broadly prospects are considered to be quite positive and the industry in a ‘healthy situation’, there is a widespread lack of confidence or uncertainty regarding whether the necessary supply of labour exists. It was also unclear to most how increased demand would be met other than by increased reliance on overseas workers and increased rates of pay. Although one or two felt the market would naturally adjust itself such that increased pay rates would entice new entrants, they admitted this would be a slow realignment. “The industry outlook is promising. However, the biggest challenge is the lack of resources with which to deliver the work. Getting access to the right quality of people is a key issue.“ [Contractor] “The industry is in good shape. We are all doing well. There’s lots of work. The challenges are finding good quality people.” [Contractor] “It is difficult, it’s certainly not easy. We could have taken on additional employees, but they are simple not available to us. The lack of skilled resource is the biggest single limiting factor for this business.” [Contractor] “The forecast level of new build projects is a particular threat to the industry. Where will the skills come from to deliver major new projects? Certainly not from the existing resource pool, as it cannot cope with today’s demand.” [Contractor] “For our company, there is no single skills set where we feel comfortable today or confident that we will be able to resource it sufficiently in the future.” [Contractor] “We will struggle to meet the next levels of UK demand as we are struggling today. The situation is similar in other sectors and so will further adversely influence skills supply overall.” [Contractor] Shortfalls in the supply of sufficiently skilled staff were generally regarded as serious, as opposed to merely ‘inconvenient’ and likely to lead to reduced output and reduced investment. “It’s hard to say because of the volatility of the sector. But I think employment levels will go up, on a global scale. What this means for UK employment levels is difficult to say. On the one hand I expect there to be more demand. But skills here are rare,

39

so many projects will be driven out of the UK to countries or centres where the necessary skills are readily available.” [Contractor] “If we cannot meet the industry’s demands then it will end in plant and equipment failure and ultimately unplanned and possibly very significant power outages/shortages.” [Contractor] “With the current state of the contracting industry we cannot deliver the planned investment, let alone build, operate and maintain all the assets. There is a real danger that it won’t happen.” [Client] “We have to educate, educate, educate. We have to hit schools and talk to kids at year 10. We have to get them early otherwise we may as well pack our bags and the last one out please turn off the lights.” [Petrochemicals client] ‘If things don’t change the outlook is bleak. We won’t secure manufacturing investment.” A phenomenon reported by many clients has been the reduction in the number of contractors over recent years due to take overs / consolidations, some contractors withdrawing from certain parts of the market and others going out of business. As one client commented ‘we are struggling to get sufficient competition in our procurement processes.’ Reduced competition was felt to have a detrimental effect not only in the terms and price that could be obtained (one client called the Contractor Community ‘mercenary’), but also it results in a reduction in innovation and all other improvement practices which competition enforces. A number of contractors felt this phenomenon merely represented a re-balancing of the market situation and provided the opportunity for increased margins. However, even contractors raised the issue of ‘an industry dominated by a culture of greed’ and it becoming an industry dominated by maintaining and increasing margins. “We have definitely moved from being a quality led to a margin driven industry. Quality is being sacrificed to make up for the shortfall in labour and the demands being placed on an ageing workforce. Operators are aware that if they are able to prove that they are hitting targets that they will remain open and this is what is driving the industry on. It’s not about good quality anymore. It’s about survival and making sure people have jobs to go to the following week.” [Contractor]

Another trend pointed out by some clients and contractors is clients shifting their business models from outsourcing to bringing functions staff back in-house. There is insufficient evidence to say how extensive this is and whether it will continue. For some contractors the implication was that as well as competing with other contractors and other industries for skilled staff, they were also competing with their clients. “Our labour supply is often determined by the behaviour of our own clients. So, depending on how and when our client companies launch a big recruitment campaign we find it sometimes very difficult to hire staff for ourselves.” [Contractor] “Many of our clients have strengthened their engineering capability and hired more engineers on a permanent basis. There is a move from outsourcing engineering work towards doing more in-house again, with in-house engineering staff. These

40

client companies are competing with us, as contractors, for the same skilled candidates.” [Contractor] Evidence from clients themselves was less clear but one did comment that he felt that reliance on contractors was not the way to go, and felt the industry needed a return to salaried staff, grow and train, and to re-start apprenticeships. Actions felt to be required Although not a specific area covered in the questioning, a number of respondents raised issues in regard to actions that they felt are needed to help ease some of the skills shortages. Predictably though solutions were less apparent than identification of the skills shortages themselves. •

A number of clients emphasised the need to work harder to make their industries more appealing to young people. This was felt to be required at a young age. “We have to educate, educate, educate. We have to hit schools and talk to kids at year 10. We have to get them early otherwise we may as well pack our bags and the last one out please turn off the lights.” [a client in petrochemicals. A client in nuclear decommissioning also talked about the need to make the sector more appealing to young people]

•

One client felt a key priority for the industry was to improve management capabilities in contractor companies, who he felt were not often creative enough in dealing with resource issues.

•

More industry collaboration on skills and training issues. While there were felt to be some good examples of this, more was needed to reach critical mass and to work out how best to tackle skills issues. “It comes down to investment, but industry, not government, must accept responsibility.”

•

Others felt more pressure was needed on the government to help subsidise training in the industry. Others felt, too, that the government needs to act more decisively in regard to energy policy, particularly to ensure that when a peak of new build work comes this peak is not too high.

•

Setting up of an industry academy (the suggestion related to ADR drivers). “In ten years time there will be a chronic shortage unless we deal with this problem now.” The problem was felt to be manageable since training an ADR driver only takes around a year, but the issue did need to be tackled sooner rather than later.

41

4

Development of the Stock Flow Model

4.1 Background A key project objective was the development of a Stock Flow Model that could be used for examining prospects in the Contractor Community in quantitative terms. This was to include the current numbers of contractors employed, together with the expected numbers leaving the industry for retirement and other reasons, and (if feasible) potential new entrants including entrants of labour from other industries, thus providing a forward look at likely numbers and key pressure points. In practice, problems of data availability and quality limit what can be achieved (these issues are discussed in more detail in Section 4.2 and in Annex B below). It has been possible to develop a general quantitative model which describes certain features of the contractor group and which addresses the sensitivities of possible future developments to a number of key assumptions. The model sets these out in a transparent fashion, highlighting the data sources and assumptions used. The approach considers the contractor workforce as a whole, a distinct entity in its own right, covering a number of sectors, rather than it forming an often tiny and indistinguishable part of the oil, gas, chemical, marine, water, electricity, and nuclear industries respectively. The model is based primarily on data supplied by ECITB based on their statutory returns. As noted in Section 2, official data for model development and forecasting was found to be of limited value for this exercise due to the above characteristics of the population of interest.31 The ECITB data have some limitations, but they are the only relevant data currently available. Some new primary data collection of a more qualitative nature was undertaken to fill some of the gaps, based on interviews and focus groups /workshops.32 These methods were also used to confirm that the basic ECITB based data (and related assumptions) were robust and representative. The focus in this checking process was on: • the overall scale of employment in the Contracting Community; • the structure of the workforce by discipline, primarily measured in terms of occupational mix, but also covering to a much weaker extent qualification profiles (and also age structures); and • future prospects (scale, and patterns of change). 31 32

This included the Annual Business Inquiry (ABI) and the Labour Force Survey (LFS). The aim of this final phase of the project was to collect additional information from companies at the top of the supply chain and from contractors themselves about whether various activities are subcontracted and to whom. The aim was to obtain information on the scale and type of engineering/construction activities they let or sub-contract and how this compares to the initial stock flow model based estimates. In this way a quantitative picture was developed about the number of contractors as well as the scale of their activities. The aim was to obtain reasonably robust information on the key patterns, and orders of magnitude, rather than precise numbers. The participants of the interviews were presented with a few stylized facts based on the ECITB data and then asked to make judgments about the scale of any amendments required to get a more comprehensive and representative picture. This focused on the three key elements (overall scale/size of the contracting community; structure in terms of skill requirements (discipline profiles, occupations, qualifications); and future prospects (key features of expected future changes including replacement needs).

42

An ideal stock flow model would look like Figure 4.1. In practice, the data to construct all these elements are not available. Given the data currently available it is only possible to build a fairly rudimentary stock flow model, covering the first five parts of Figure 4.1. An ideal model should encompass the following main elements: • good indicators of the scale of expansion demands; • information of the changing pattern of demand for skills within this total; and • estimates of replacement needs. To obtain good estimates of likely Expansion demands robust estimates of the current level of employment (proxying demand), broken down by key dimensions (activities, occupations, etc) are needed. In addition, information is needed on the mix and levels of activity in different sub-sectors, as well as detailed information on productivity improvements, average hours worked and patterns of part-time working. In practice, information on much of this is very limited or completely missing which constrains what is possible in terms of quantitative modelling. The key issue as far as skill needs is concerned is the implication for the pattern of occupations (and other aspects of skill) in the future. This is also linked to the mix of client activity, but should also reflect any trends due to technological change, etc. Ideally it would be nice to draw out the implications for qualification requirements (focusing on graduates or other skills that cannot be generated with just a short course of education or training). The importance of some generic and softer skills also needs to be considered. Together with qualifications this last element is important in defining “discipline skill profiles”. In practice the data available severely limit what is possible. The final key element is Replacement demands. These depend upon the age structure of the workforce and rates of outflow for retirement and other reasons. Again data are limited but some benchmark projections can be developed. Other considerations that perhaps ought to be recognised are that seasonal patterns are quite important in the sector and may need to be considered. However this is probably a second order problem and the focus here is on medium term trends using annual data. A second issue is the growing importance of migration and cross national border movements of skilled labour. This will undoubtedly require careful consideration, but lack of reliable data is likely to severely limit what is feasible from a modelling perspective.

43

Figure 4.1: General Approaches to Skills Forecasting 1. Activity levels (key demand drivers) •

output levels mix of activities • government policy, regulation & spending •

2. Views about other key drivers: • • •

productivity technology skill mix

3. Stocks • •

Current employment Expansion demand (by occupation and/or qualification) 4.

Views

about

the

workforce: • •

age structures outflow rates

5. Flows Replacement demand by occupation / qualification

6.

Views

about

other

aspects of supply: • • • •

7. Balances (demand – supply): • • •

Vacancies Skill gaps Other indicators

44

activity rates average hours new entrants net migration

4.2 Construction of the Stock Flow Model in Practice Data sources The basic data underlying the model were supplied by ECITB data in the form of a collection of related Excel workbooks.33 This information was collated together into a single workbook focussing on trends over time.34 This was then extended to include a “Front end” (to facilitate changes in assumptions by the user) and a “Replacement Demand Module” (the key element in a stock flow model). The Front end draws on a similar model developed previously by IER for SEMTA, albeit much simplified.35 The Replacement Demand Module is based on similar module developed for IER’s LEFM and the Working Futures series of projections produced for SSDA.36 The Front end The Front end includes the facility to alter the “scale” of the projection in terms of employment levels, as well as considering alternative breakdowns by occupation (and to a limited degree, breakdowns by sector/type of work and region). This is summarised in the navigation panel as shown in Figure 4.2. The ECITB data could not be cross classified by the main dimensions of: type of work (industry); discipline (occupation); and region. Therefore the model does not include these dimensions simultaneously. The model works on a single dimension at a time. This means that it is not possible to get an entirely consistent set of results across all three of the main dimensions at the same time, although the mechanisms built in to the model ensure that they are broadly consistent. The Replacement Demand Module In many respects this is the core of the Stock Flow Model. It focuses on the nearest the ECITB data gets to “discipline” categories (primarily occupations), both onsite and offsite. The assumptions regarding age structures, flow rates, qualifications, etc are based on rather limited information including: (a) the results of the aggregate UK numbers used for SEMTA; (b) some alternative input files based on the aggregate all industries data used in Working Futures; or (c) data based on the whole construction sector; (d) some information drawn from ad hoc sources such as the DTI (2001) study or COGENT’s database on the nuclear industry.37 None of these are ideal but unfortunately there are no direct data on age structure of flows for ECITB categories. It was hoped that the qualitative interviews might provide some additional general information but this also proved very limited. Limitations 33 34

35

36

37

The authors are grateful to ECITB for providing these data and for their related assistance. As noted in Section 2 (Table 2.3), the ECITB data have been boosted by around 40% (17,000 jobs) to allow for employment outside the ECITB footprint. See Wilson, R.A. (2001) SEMTA Quantitative Forecasting Model: Detailed Specification and User Manual, Institute for Employment Research University of Warwick, Coventry. Wilson, R. A., A. D. Dickerson and K. Homenidou (2006). Working Futures 2004-2014, Technical Report, Sector Skills Development Agency: Wath upon Dearne. DTI (2001) Design and Engineering Contractors in the Oil and Gas Sector: Update February 2001, Department of Trade and Industry, London.

45

It is important to recognise the limitations of the present model. These reflect the limited nature of the data which have been available to build it. It illustrates the potential for such an approach were better data available. Essentially the present model provides a framework for thinking about the various factors influencing the total demands for contractor skills. It highlights the key factors as follows: i. activity levels in the sector (i.e. levels of orders or output and the mix of such activity); ii. impacts of technology and other factors on productivity levels which may alter the level of labour input needed to deliver certain orders; iii. the typical mix of skills (occupations and or qualifications) needed to deliver this output; iv. the likely scale of replacement needs as a result of outflows due to retirement and other factors. The main limitations are lack of good quantitative data, especially in the following main areas follows: a. activity levels (orders, output) – simply proxied here by growth in employment levels; b. productivity (output per hour worked) – again, assumed here to be incorporated into the employment change indicator; c. employment cross classified by occupation, type of work and region – the data used here focus on just one dimension at a time);38 d. data on qualifications within occupations – not available in the current data set; e. data on replacement demand elements, including age structure and outflow rates – limited here to ad hoc data available from other sources. Until such data can be generated at a more detailed level, the outputs from the model will remain more qualitative and indicative than quantitative and precise. It is clear that some detailed relevant information is available but this tends to be rather patchy and specific to particular sub-sectors. For example the paper by Limbrick (2007) presents data on closure of nuclear plant as well as commissioning of new gas fired and other plant to generate electricity. This is set out in terms of numbers of plant or in some cases scale (in terms of capacity to generate electricity). There is no direct link to employment requirements for decommissioning, construction, fitting or repair and maintenance. The ECITB in its 2005 Market Report, summarises the results of its Manpower Forecasts, which are based on views about projects in the pipeline. But this provides very little information on the link between such projects and labour requirements. The Manpower Forecasts in the 2005 Market Report are based on the perceptions of the ECITB client group about changing activity levels, combined with assumptions about implications for skill needs. The Capital Projects Client Group is a possible source of more accurate information about future Activity levels. Ideally, information on this is needed for the base year and for past and future trends. However, the precise nature of

38

In their latest 2006 Industry Report EICTB does present data cross classified by sector and region as well as occupation and region but this kind of information was not available on a time series basis for this project.

46

such work and the Key Drivers which will determine future levels are likely to vary across different parts of the client group. Rather than try to second guess what these might be and their implications for skill demand it might be better to use a combination of the approaches used in the ECITB Manpower Forecast, the draft Nuclear Industry Gap Analysis, and the DTI (2001) study to get a consensus about the main possibilities. This is likely to be a scenario building / qualitative approach rather than precise quantitative forecasts based on econometric models.

4.3 Scope for further refinement Building a Stock Flow Model for the Contracting Community was always going to be a challenging project because of the difficulties of defining the sector precisely and because of the limitations of most official data sets for measuringits scale and structure. The focus in this section has been on presenting for the first time a Stock Flow Model, which can provide a consistent quantitative picture of how the demand for skills is changing in this sector. It is clear that the data that have been assembled are far from perfect for this purpose. Nevertheless, they illustrate the scale of some of the problems faced and highlight the potential range of future possibilities. The results produced therefore demonstrate the potential value of such a tool, given better data. There is scope for improving the quality of the existing data. For example, dealing with some of the discontinuities mentioned above. There also a number of gaps in the data. Better information is needed on overall employment numbers and particularly those areas not covered by the ECITB estimates, including the contracting population covered by Cogent and SEMTA. More information is also required on discipline profiles and replacement needs. Robust indicators of possible changes in future activity levels in the sector (including decommissioning) are also needed. Given such data the scope for refining and improving the existing model is considerable.

47

5

Employment prospects for the Contractor Community

5.1 Background to the projections Benchmark scenario The benchmark set of quantitative projections presented in this section are based on the overall prospects for the economy as set out in Working Futures (Wilson et al, 2006). A set of growth rate assumptions based on this scenario is used to develop to drive the Stock-Flow Model described in Section 4. This results in a relatively modest decrease in overall demand for labour in the Contracting Community. Implications for replacement demands are also presented. Despite the slight decline in employment projected in the benchmark scenario, these results suggest a substantial increase in the need for trained entrants to fill the job openings in the Contracting Community that will be created as people retire or leave the existing workforce for other reasons. Alternative scenarios These results are then contrasted with two alternative scenarios based on discussions with ECITB and other industry representatives. These highlight the possibility of a much more bullish situation, reflecting more recent assessments of the need for new plant in many sectors supplied by the Contracting Community, as well as increased demand for decommissioning, especially in the nuclear sector. Again the implications for replacement needs are also assessed. These suggest even more substantial increases in demand for many key skills.

5.2 Benchmark scenario The benchmark scenario is summarised in Table 5.1 and Figure 5.1. This scenario is based on the assumption that employment in the Contractor Community as a whole grows in line with the rate for the whole construction sector as suggested in Working Futures (Wilson et al, 2006). This is essentially a very conservative picture, with employment levels in both on- and off-site activities flattening off over the next 5-10 years. This takes no account of more recent information which suggests a marked upturn in demand. This possibility is considered in the alternative scenarios discussed below. Table 5.2 indicates the implications for demand by occupation for on-site staff. Table 5.3 shows the corresponding position for off-site staff. The changing patterns of demand for skills within the totals set out in Table 5.1 and Figure 5.1 are assumed to change in line with recent trends, based on a logistic specification as set out in Section 4 and Annex B. The historical patterns show considerable volatility as shown in Figure 5.1a. Some groups amongst onsite staff such as other technicians exhibit very rapid growth. These indicate where the pressure points may be for particular skills. In contrast, welders and pipe fitters exhibit strong negative trends. For offsite staff, the projected trends are generally flat (see Figure 5.1b).39

39

As noted in Section 4, the historical data for clerks, administrators and craftpersons exhibit some discontinuities. These are reflected in the projections. Correcting the discontinuities would have implications for the projected values.

48

The implications for replacement needs and total requirements over the period to 2014 are shown in Table 5.4 and Figures 5.2 and 5.3. These results highlight the fact that replacement needs are positive for all occupations and that these often offset any negative trends in employment, resulting in the need to recruit and train even in many of the areas where employment is projected to decline. Figure 5.1: Overall Employment Trends –Benchmark (default) Scenario Total employment trends 70.0

60.0

50.0

Total employment (default)

40.0

Total employment (current) On Site Default Scenario On Site Current Scenario Off Site Default Scenario

30.0

Off Site Current Scenario

20.0

10.0

0.0 1996

Table

5.1:

1999

Overall

2002

Employment

2005

2008

2011

Trends

–Benchmark

Historical employment levels Projected employment levels 1996 2001 2006 2007 2008 2009

2014

(default)

Scenario

2010

(000s) 2011

2012

2013

2014

All employment of which: on-site head office

49.3

56.9

62.5

61.6

60.9

60.4

60.2

59.8

59.6

59.4

59.3

20.8 28.5

28.6 28.3

27.2 35.3

26.8 34.8

26.5 34.4

26.3 34.1

26.2 34.0

26.1 33.8

26.0 33.7

25.9 33.6

25.8 33.5

Off-site (all broad occs)

28.5

28.3

35.3

34.8

34.4

34.1

34.0

33.8

33.7

33.6

33.5

All project types of which: Dismantle New Build Repair

20.8

28.6

27.2

26.8

26.5

26.3

26.2

26.1

26.0

25.9

25.8

0.3 6.3 14.3

0.2 7.3 21.1

0.3 4.1 22.8

0.3 4.0 22.5

0.3 4.0 22.2

0.3 4.0 22.1

0.3 3.9 22.0

0.3 3.9 21.8

0.3 3.9 21.8

0.3 3.9 21.7

0.3 3.9 21.7

20.8

28.6

27.2

26.8

26.5

26.3

26.2

26.1

26.0

25.9

25.8

On-site (all detailed occs)

49

Table 5.2: Employment Trends, onsite occupations –Benchmark (default) Scenario ON SITE

Managerial staff Incorporated engineers Prof enginrs; scientists; supervs; technlgts Electrical technicians Instrument technicians Mechanical technicians Maintenance technicians NDT personnel Other technicians Electricians Pipefitters Platers Mechanical fitters Erectors Asbestos removers Scaffolders Insulators & sheet metal workers Riggers Welders Architectural outfitters Crane drivers Forklift drivers Shotblasters, painters & deck screeders Fireproofers Industrial cleaners Production process operatives Working chargehands Other site staff Other All

1996

1997

1998

1999

2000

2001

2002

542 0 2320 654 411 478 0 137 847 665 2881 940 1429 2091 0 78 152 0 2076 0 152 33 115 15 115 320 777 3596 0 20823

498 0 2336 557 403 675 0 212 1090 652 2740 927 1571 1955 2 355 186 0 1792 28 134 20 220 28 76 464 801 4042 0 21762

715 0 2417 522 403 758 0 129 1022 674 2708 821 1541 2052 0 215 159 0 2168 19 140 48 253 68 76 471 973 3151 0 21502

563 0 2239 501 471 729 0 114 761 569 2587 887 1793 2312 0 347 88 0 1838 5 129 63 292 10 18 382 936 3776 0 21409

399 623 3264 901 662 1023 362 640 1156 790 3843 1172 2270 3201 0 437 100 0 2739 24 178 51 255 10 54 146 1112 4055 0 29466

734 630 2794 954 631 1037 277 265 1095 1188 3881 1129 2072 3021 5 106 377 0 2353 32 148 72 0 17 54 159 1391 4171 0 28595

577 757 2733 978 708 778 581 451 1880 1091 2942 1047 1739 2553 0 122 12 114 1985 0 160 25 103 0 43 216 1337 2608 0 25538

Historical employment levels 2003 2004 2005 614 491 2849 975 783 828 520 545 2016 1051 2537 970 1394 1245 6 374 95 938 1659 0 128 42 108 0 17 200 1112 3097 0 24592

744 279 2525 896 896 920 166 104 2034 1332 2124 724 1783 1663 4 205 115 223 1579 0 113 23 98 0 4 262 1202 2919 0 22935

782 258 2907 1027 874 1101 260 479 2347 948 1991 880 1818 1156 0 76 159 916 1678 0 132 63 91 0 44 147 1108 3135 0 24378

2006

Projected employment levels 2007 2008 2009

1280 320 3909 909 688 824 171 694 2762 1079 1741 865 2004 1317 0 88 155 872 1806 0 128 67 99 0 0 507 1115 3798 0 27199

943 342 3387 1157 1000 1087 263 573 2950 1331 2045 892 1952 1372 0 124 96 690 1709 0 128 54 32 0 0 206 1347 3131 0 26812

967 315 3386 1190 1048 1100 250 624 3200 1374 1884 853 1917 1245 0 113 89 648 1611 0 121 55 28 0 0 190 1351 2967 0 26526

992 290 3385 1224 1098 1113 238 680 3467 1419 1736 816 1882 1129 0 102 84 609 1519 0 115 55 25 0 0 175 1355 2811 0 26320

2010

2011

2012

2013

1019 268 3389 1261 1151 1127 226 742 3757 1466 1601 782 1851 1026 0 93 78 573 1434 0 110 55 22 0 0 161 1360 2666 0 26218

1042 246 3376 1292 1201 1136 214 805 4044 1508 1469 745 1811 927 0 84 73 536 1347 0 104 56 19 0 0 148 1359 2516 0 26057

1065 226 3363 1324 1253 1145 203 873 4346 1550 1347 710 1772 837 0 76 68 502 1265 0 98 56 17 0 0 136 1358 2374 0 25965

1086 207 3343 1355 1305 1152 191 945 4654 1591 1233 676 1731 755 0 68 63 469 1185 0 93 56 15 0 0 125 1355 2236 0 25890

Table 5.3: Employment Trends, offsite occupations –Benchmark (default) Scenario Historical employment levels 2003 2004 2005

Projected employment levels 2007 2008 2009

OFFSITE GB

1996

1997

1998

1999

2000

2001

2002

2010

2011

2012

2013

Managerial Prof Engineers Incrporated Engineers Administrators Clerks Supervisors Craftpersons Other Employees

4449 8548 4450 4225 4069 1022 998 758

4661 8170 4252 4591 4206 1094 1029 780

4935 9189 4394 4614 4273 1035 1038 685

4605 9165 4304 4783 3831 1115 1218 458

4556 7605 3835 4711 3166 442 512 371

5247 8409 3789 5254 3165 1097 569 786

5839 9496 4603 6623 3700 1609 985 1029

5437 9117 4302 6610 2730 1378 957 780

5047 7178 7201 9021 77 2629 1719 1406

5368 7357 5613 8323 61 2683 1172 863

5508 10156 6696 9304 15 1404 42 2131

5430 10011 6601 9172 15 1384 41 2101

5372 9904 6530 9074 14 1370 40 2078

5330 9828 6479 9004 14 1359 40 2062

5309 9789 6454 8969 14 1354 40 2054

5277 9729 6415 8914 14 1345 40 2042

5258 9695 6392 8882 14 1341 40 2034

5243 9667 6374 8857 14 1337 40 2029

28520

28784

30163

29478

25198

28316

33884

31311

34278

31440

35255

34754

34384

34117

33984

33776

33656

33559

Total Employees

50

2006

Figure 5.1a: Employment Trends, onsite staff –Benchmark (default) Scenario

Onsite occupational trends

Managerial staff Incorporated engineers

6000

Prof enginrs; scientists; supervs; technlgts Electrical technicians Instrument technicians Mechanical technicians

5000 Maintenance technicians NDT personnel Other technicians Electricians 4000 Pipefitters Platers Mechanical fitters Erectors

3000

Asbestos removers Scaffolders Insulators & sheet metal workers 2000

Riggers Welders Architectural outfitters Crane drivers

1000 Forklift drivers Shotblasters, painters & deck screeders Fireproofers Industrial cleaners 20 14

20 12

20 10

20 08

20 06

20 04

20 02

20 00

19 98

19 96

0 Production process operatives Working chargehands Other site staff Other

-1000

51

Figure 5.1b: Employment Trends, offsite staff –Benchmark (default) Scenario

Offsite Occupations 12000 Managerial

10000

Prof Engineers 8000

Incrporated Engineers Administrators

6000

Clerks Supervisors

4000

Craftpersons 2000

Other Employees

52

20 14

20 12

20 10

20 08

20 06

20 04

20 02

20 00

19 98

19 96

0

Table 5.4: Replacement Demands –Benchmark (default) Scenario

Replacement Demand:

Period: 2006 - 2014 On-Site Occupations

(000s)

Base year employment Expansion Occupational Replacement Net level demand Retirements mobility Migration demand requirement Managerial staff 1.3 -0.2 0.3 0.0 0.0 0.3 0.1 Incorporated engineers 0.3 -0.1 0.1 0.0 0.0 0.1 0.0 Professional engineers; scientists; supervisors; 3.9 -0.6 0.8 0.0 0.0 0.8 0.3 Electrical technicians 0.9 0.5 0.3 0.0 0.0 0.3 0.8 Instrument technicians 0.7 0.7 0.2 0.0 0.0 0.2 0.9 Mechanical technicians 0.8 0.3 0.3 0.0 0.0 0.3 0.6 Maintenance technicians 0.2 0.0 0.0 0.0 0.0 0.0 0.0 NDT personnel 0.7 0.3 0.2 0.0 0.0 0.2 0.5 Other technicians 2.8 2.2 0.5 0.0 0.0 0.5 2.7 Electricians 1.1 0.6 0.3 0.0 0.0 0.3 0.8 Pipefitters 1.7 -0.6 0.4 0.0 0.0 0.4 -0.2 Platers 0.9 -0.2 0.2 0.0 0.0 0.2 0.0 Mechanical fitters 2.0 -0.3 0.6 0.0 0.0 0.6 0.3 Erectors 1.3 -0.6 0.4 0.0 0.0 0.4 -0.2 Asbestos removers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Scaffolders 0.1 0.0 0.0 0.0 0.0 0.0 0.0 Insulators & sheet metal workers 0.2 -0.1 0.0 0.0 0.0 0.0 -0.1 Riggers 0.9 -0.4 0.2 0.0 0.0 0.2 -0.2 Welders 1.8 -0.7 0.6 0.0 0.0 0.6 -0.1 Architectural outfitters 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Crane drivers 0.1 0.0 0.0 0.0 0.0 0.0 0.0 Forklift drivers 0.1 0.0 0.0 0.0 0.0 0.0 0.0 Shotblasters; painters & deck screeders 0.1 -0.1 0.0 0.0 0.0 0.0 -0.1 Fireproofers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Industrial cleaners 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Production process operatives 0.5 -0.4 0.1 0.0 0.0 0.1 -0.3 Working chargehands 1.1 0.2 0.3 0.0 0.0 0.3 0.5 Other site staff 3.8 -1.7 0.9 0.0 0.0 0.9 -0.8 Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 All On-Site occupations 27.2 -1.4 6.9 0.0 0.0 6.9 5.5

Managerial Professional Engineers Incorporated Engineers Administrators Clerks Supervisors Craftpersons Other Employees All Off-Site occupations These are Replacement Demand Results. Change Replacement Demand Assumptions to develop alternative scenarios.

5.5 10.2 6.7 9.3 0.0 1.4 0.0 2.1 35.3

-0.3 -0.5 -0.3 -0.5 0.0 -0.1 0.0 -0.1 -1.8

Off-Site Occupations 1.1 1.9 1.5 2.3 0.0 0.4 0.0 0.5 7.8

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

1.1 1.9 1.5 2.3 0.0 0.4 0.0 0.5 7.8

Replacement Demand = Retirements + Occupational Mobility + Migration Net requirement = Expansion Demand + Replacement Demand

53

0.8 1.4 1.2 1.9 0.0 0.4 0.0 0.4 6.1

Figure 5.2: Replacement Demands onsite occupations–Benchmark (default) Scenario

M a na g e ri a l s t a f f

0 .15

-0 .17 -0 .0 3 -0 .13

Inc o rp o ra t e d e ng i ne e rs P ro f e s s io na l e ng ine e rs ; s c i e nt is t s ; s up e rv is o rs ; t e c hno lo g i s t s

0 .2 5

-0 .59

Ele c t ri c a l t e c hnic ia ns

0 .4 8

Ins t rume nt t e c hnic ia ns M e c ha ni c a l t e c hnic ia ns

0 .75

0 .6 7 0 .59

0 .3 3

0 .9 1

0 .0 5 0 .0 1

M a i nt e na nc e t e c hnic ia ns N D T p e rs o nne l

0 .3 3

0 .50

Ot he r t e c hnic ia ns 0 .55

P i p e f it t e rs

-0 .0 2

-0 .2 2

M e c ha ni c a l f it t e rs Ere c t o rs

-0 .6 4

0 .8 2

-0 .18

-0 .6 1

P la t e rs

0 .2 8

-0 .3 1 -0 .19 0 .0 0 0 .0 0

A s b e s t o s re mo v e rs S c a f f o ld e rs Ins ula t o rs & s he e t me t a l w o rke rs R i g g e rs

-0 .4 3

W e ld e rs

0 .0 0 -0 .0 3 -0 .0 6 -0 .10 -0 .2 5 -0 .13

-0 .70

0 .0 0 0 .0 0

A rc hit e c t ura l o ut f it t e rs -0 .0 2 -0 .0 4

C ra ne d ri v e rs F o rklif t d ri v e rs

-0 .0 1 -0 .0 6 -0 .0 9

S ho t b l a s t e rs ; p a int e rs & d e c k s c re e d e rs

0 .0 0

0 .0 0 0 .0 0 0 .0 0 0 .0 0

F ire p ro o f e rs Ind us t ria l c le a ne rs -0 .2 8 -0 .3 9

P ro d uc t io n p ro c e s s o p e ra t iv e s W o rking c ha rg e ha nd s

0 .2 3

Ot he r s it e s t a f f

-2.00

0 .53

-0 .8 2

-1.6 9

0 .0 0 0 .0 0

Ot he r

-1.50

-1.00

-0.50

0.00

Expansion demand

0.50

1.00

1.50

2.00

Net requirement

Figure 5.3: Replacement Demands onsite occupations–Benchmark (default) Scenario Off Site 0 .8 2

M a na ge ria l

P ro f e s s io na l E ngine e rs

Inc o rpo ra t e d E ngine e rs

A dm inis t ra t o rs

- 0 .2 7 1.3 7 - 0 .5 1 1.2 1 - 0 .3 3 1.8 8 - 0 .4 6 0 .0 0 0 .0 0

C le rk s

0 .3 5

S upe rv is o rs

- 0 .0 7 0 .0 1 0 .0 0

C ra f t pe rs o ns

0 .4 3

O t he r E m plo ye e s

-1.00

- 0 .11

-0.50

2 .75

2 .2 1

Ele c t ric ia ns

0.00

0.50

Expansion demand

1.00 [thousands]

Net requirement

54

1.50

2.00

2.50

3.00

5.3 Alternative Scenarios Scenario 1 The first alternative scenario is summarised in Table 5.5 and Figure 5.4. This is based on discussions with ECITB and other industry representatives, and reflects more recent information about ongoing trends and thinking about future prospects (see ECITB (2007). The underlying assumption here is one of an overall increase in employment in the Contracting Community of around 5% p.a. Figure 5.4 shows how this compares with the benchmark scenario. While this might at first glance appear somewhat extreme it is in fact only just slightly faster than the average trend rate of increase exhibited over the last 10 years. Table 5.6 indicates the implications for demand by occupation for on-site staff. Table 5.7 shows the corresponding position for off-site staff.40 In contrast to the benchmark scenario a number of occupations now exhibit quite rapid rates of growth, with implications for recruitment difficulties for employers trying to fill such jobs and for training providers to fill the ensuing gaps. As well as the “other technicians” category, professional scientists and engineers, electricians, electrical technicians, instrument technicians, and NDT personnel are amongst the occupations projected to see some of the fastest increases. The implications for replacement needs are shown in Table 5.8 and Figures 5.5 and 5.6. In this scenario, total requirements increase in all occupations, both on and off-site. This reflects the combination of much faster “expansion demand” growth with substantial replacement needs.

40

As noted for the Benchmark Scenario, the historical data for clerks, administrators and craftpersons exhibit some discontinuities. These are reflected in the projections. Correcting the discontinuities would have implications for the projected values.

55

Figure 5.4: Overall Employment Trends – Alternative Scenario 1

Total employment trends 100.0 90.0 80.0 70.0 60.0

Total employment (default) Total employment (current) On Site Default Scenario

50.0

On Site Current Scenario Off Site Default Scenario

40.0

Off Site Current Scenario

30.0 20.0 10.0 0.0 1996

1999

2002

2005

2008

2011

2014

Table 5.5: Overall Employment Trends – Alternative Scenario 1

Historical employment levels Projected employment levels 1996 2001 2006 2007 2008 2009 All employ of which: on-site head off

2010

(000s) 2011

2012

2013

2014

49.3

56.9

62.5

65.6

68.8

72.3

75.9

79.7

83.7

87.9

92.3

20.8 28.5

28.6 28.3

27.2 35.3

28.6 37.0

30.0 38.9

31.5 40.8

33.1 42.9

34.7 45.0

36.5 47.2

38.3 49.6

40.2 52.1

Off-site 28.5 (all broad occs)

28.3

35.3

37.0

38.9

40.8

42.9

45.0

47.2

49.6

52.1

All project of which: Dismant New Bu Repair

20.8

28.6

27.2

28.6

30.0

31.5

33.1

34.7

36.5

38.3

40.2

0.3 6.3 14.3

0.2 7.3 21.1

0.3 4.1 22.8

0.3 4.3 23.9

0.3 4.5 25.1

0.4 4.7 26.4

0.4 5.0 27.7

0.4 5.2 29.1

0.4 5.5 30.5

0.4 5.8 32.1

0.5 6.0 33.7

On-site (all detaile

20.8

28.6

27.2

28.6

30.0

31.5

33.1

34.7

36.5

38.3

40.2

56

Table 5.6: Employment Trends, onsite occupations – Alternative Scenario 1 Ctrl s forNavigation Panel

ON SITE

Managerial staff Incorporated engineers Prof enginrs; scientists; supervs; technlgts Electrical technicians Instrument technicians Mechanical technicians Maintenance technicians NDT personnel Other technicians Electricians Pipefitters Platers Mechanical fitters Erectors Asbestos removers Scaffolders Insulators & sheet metal workers Riggers Welders Architectural outfitters Crane drivers Forklift drivers Shotblasters, painters & deck screeders Fireproofers Industrial cleaners Production process operatives Working chargehands Other site staff Other All

1996

1997

1998

1999

2000

2001

2002

542 0 2320 654 411 478 0 137 847 665 2881 940 1429 2091 0 78 152 0 2076 0 152 33 115 15 115 320 777 3596 0 20823

498 0 2336 557 403 675 0 212 1090 652 2740 927 1571 1955 2 355 186 0 1792 28 134 20 220 28 76 464 801 4042 0 21762

715 0 2417 522 403 758 0 129 1022 674 2708 821 1541 2052 0 215 159 0 2168 19 140 48 253 68 76 471 973 3151 0 21502

563 0 2239 501 471 729 0 114 761 569 2587 887 1793 2312 0 347 88 0 1838 5 129 63 292 10 18 382 936 3776 0 21409

399 623 3264 901 662 1023 362 640 1156 790 3843 1172 2270 3201 0 437 100 0 2739 24 178 51 255 10 54 146 1112 4055 0 29466

734 630 2794 954 631 1037 277 265 1095 1188 3881 1129 2072 3021 5 106 377 0 2353 32 148 72 0 17 54 159 1391 4171 0 28595

577 757 2733 978 708 778 581 451 1880 1091 2942 1047 1739 2553 0 122 12 114 1985 0 160 25 103 0 43 216 1337 2608 0 25538

Historical employment levels 2003 2004 2005 614 491 2849 975 783 828 520 545 2016 1051 2537 970 1394 1245 6 374 95 938 1659 0 128 42 108 0 17 200 1112 3097 0 24592

744 279 2525 896 896 920 166 104 2034 1332 2124 724 1783 1663 4 205 115 223 1579 0 113 23 98 0 4 262 1202 2919 0 22935

782 258 2907 1027 874 1101 260 479 2347 948 1991 880 1818 1156 0 76 159 916 1678 0 132 63 91 0 44 147 1108 3135 0 24378

2006

Projected employment levels 2007 2008 2009

1280 320 3909 909 688 824 171 694 2762 1079 1741 865 2004 1317 0 88 155 872 1806 0 128 67 99 0 0 507 1115 3798 0 27199

1004 364 3608 1232 1065 1158 280 610 3142 1418 2178 950 2079 1461 0 132 102 735 1820 0 136 58 34 0 0 219 1435 3335 0 28556

1093 356 3827 1345 1184 1243 283 706 3617 1553 2130 965 2167 1407 0 127 101 732 1821 0 137 62 32 0 0 214 1527 3353 0 29983

1187 347 4049 1464 1313 1331 284 814 4148 1697 2076 977 2252 1351 0 122 100 728 1817 0 138 66 29 0 0 209 1621 3362 0 31483

2010

2011

2012

2013

2014

1285 338 4273 1590 1452 1421 285 935 4737 1849 2019 986 2334 1293 0 117 99 722 1808 0 138 70 27 0 0 204 1715 3362 0 33060

1388 328 4497 1721 1600 1514 285 1072 5387 2008 1956 993 2413 1235 0 112 97 714 1794 0 138 74 25 0 0 198 1811 3352 0 34712

1494 317 4720 1859 1759 1608 284 1226 6101 2176 1891 997 2488 1175 0 106 95 705 1775 0 138 78 23 0 0 191 1907 3333 0 36450

1605 306 4941 2002 1929 1703 283 1397 6879 2351 1822 999 2559 1116 0 101 93 693 1752 0 137 83 22 0 0 185 2003 3305 0 38266

1720 295 5162 2152 2110 1801 281 1588 7727 2535 1752 999 2627 1057 0 96 91 680 1726 0 136 87 20 0 0 178 2099 3270 0 40187

Table 5.7: Employment Trends, offsite occupations – Alternative Scenario 1 l s for Navigation Panel

OFFSITE GB

1996

1997

1998

1999

2000

2001

2002

2010

2011

2012

2013

2014

Managerial Prof Engineers Incrporated Engineers Administrators Clerks Supervisors Craftpersons Other Employees

4449 8548 4450 4225 4069 1022 998 758

4661 8170 4252 4591 4206 1094 1029 780

4935 9189 4394 4614 4273 1035 1038 685

4605 9165 4304 4783 3831 1115 1218 458

4556 7605 3835 4711 3166 442 512 371

5247 8409 3789 5254 3165 1097 569 786

5839 9496 4603 6623 3700 1609 985 1029

5437 9117 4302 6610 2730 1378 957 780

5047 7178 7201 9021 77 2629 1719 1406

5368 7357 5613 8323 61 2683 1172 863

5508 10156 6696 9304 15 1404 42 2131

5783 10662 7030 9769 16 1474 44 2237

6072 11195 7381 10257 16 1548 46 2349

6375 11755 7750 10770 17 1626 48 2467

6695 12344 8139 11309 18 1707 50 2590

7029 12961 8545 11875 19 1792 53 2720

7381 13610 8973 12469 20 1882 56 2856

7749 14288 9420 13090 21 1976 58 2998

8138 15005 9893 13748 22 2075 61 3149

28520

28784

30163

29478

25198

28316

33884

31311

34278

31440

35255

37015

38865

40809

42853

44994

47247

49601

52091

Total Employees

Historical employment levels 2003 2004 2005

57

2006

Projected employment levels 2007 2008 2009

Figure 5.4a: Employment Trends onsite staff – Alternative Scenario 1 Onsite occupational trends

Managerial staff Incorporated engineers

9000

Prof enginrs; scientists; supervs; technlgts Electrical technicians Instrument technicians

8000 Mechanical technicians Maintenance technicians NDT personnel

7000

Other technicians Electricians 6000

Pipefitters Platers Mechanical fitters

5000 Erectors Asbestos removers 4000

Scaffolders Insulators & sheet metal workers Riggers

3000 Welders Architectural outfitters Crane drivers

2000

Forklift drivers Shotblasters, painters & deck screeders 1000

Fireproofers Industrial cleaners Production process operatives 20 14

20 12

20 10

20 08

20 06

20 04

20 02

20 00

19 98

19 96

0

Working chargehands Other site staff Other

-1000

58

Figure 5.4b: Employment Trends offsite staff – Alternative Scenario 1

Offsite Occupations 16000 14000

Managerial

12000

Prof Engineers

10000

Incrporated Engineers Administrators

8000

Clerks

6000

Supervisors

4000

Craftpersons

2000

Other Employees

59

20 14

20 12

20 10

20 08

20 06

20 04

20 02

20 00

19 98

19 96

0

Table 5.8: Replacement Demands – Alternative Scenario 1 Replacement Demand:

Period: 2006 - 2014 On-Site Occupations

(000s)

Base year employment Expansion Occupational Replacement Net level demand Retirements mobility Migration demand requirement Managerial staff 1.3 0.4 0.3 0.0 0.0 0.3 0.8 Incorporated engineers 0.3 0.0 0.1 0.0 0.0 0.1 0.1 Professional engineers; scientists; supervisors; 3.9 1.3 0.9 0.0 0.0 0.9 2.1 Electrical technicians 0.9 1.2 0.3 0.0 0.0 0.3 1.5 Instrument technicians 0.7 1.4 0.3 0.0 0.0 0.3 1.7 Mechanical technicians 0.8 1.0 0.3 0.0 0.0 0.3 1.2 Maintenance technicians 0.2 0.1 0.0 0.0 0.0 0.0 0.2 NDT personnel 0.7 0.9 0.2 0.0 0.0 0.2 1.1 Other technicians 2.8 5.0 0.6 0.0 0.0 0.6 5.5 Electricians 1.1 1.5 0.3 0.0 0.0 0.3 1.7 Pipefitters 1.7 0.0 0.5 0.0 0.0 0.5 0.5 Platers 0.9 0.1 0.2 0.0 0.0 0.2 0.3 Mechanical fitters 2.0 0.6 0.6 0.0 0.0 0.6 1.2 Erectors 1.3 -0.3 0.5 0.0 0.0 0.5 0.2 Asbestos removers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Scaffolders 0.1 0.0 0.0 0.0 0.0 0.0 0.0 Insulators & sheet metal workers 0.2 -0.1 0.0 0.0 0.0 0.0 0.0 Riggers 0.9 -0.2 0.2 0.0 0.0 0.2 0.0 Welders 1.8 -0.1 0.6 0.0 0.0 0.6 0.5 Architectural outfitters 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Crane drivers 0.1 0.0 0.0 0.0 0.0 0.0 0.0 Forklift drivers 0.1 0.0 0.0 0.0 0.0 0.0 0.0 Shotblasters; painters & deck screeders 0.1 -0.1 0.0 0.0 0.0 0.0 -0.1 Fireproofers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Industrial cleaners 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Production process operatives 0.5 -0.3 0.1 0.0 0.0 0.1 -0.2 Working chargehands 1.1 1.0 0.3 0.0 0.0 0.3 1.3 Other site staff 3.8 -0.5 0.9 0.0 0.0 0.9 0.4 Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 All On-Site occupations 27.2 13.0 7.2 0.0 0.0 7.2 20.2

Managerial Professional Engineers Incorporated Engineers Administrators Clerks Supervisors Craftpersons Other Employees All Off-Site occupations

5.5 10.2 6.7 9.3 0.0 1.4 0.0 2.1 35.3

2.6 4.8 3.2 4.4 0.0 0.7 0.0 1.0 16.8

Off-Site Occupations 1.1 1.9 1.6 2.4 0.0 0.4 0.0 0.6 8.1

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

1.1 1.9 1.6 2.4 0.0 0.4 0.0 0.6 8.1

Replacement Demand = Retirements + Occupational Mobility + Migration Net requirement = Expansion Demand + Replacement Demand

60

3.7 6.8 4.8 6.9 0.0 1.1 0.0 1.6 24.9

Figure 5.5: Replacement Demands onsite occupations– Alternative Scenario 1

M a na g e ria l s t a f f

0 .77

0 .4 4

Inc o rp o ra t e d e ng ine e rs

0 .0 7

-0 .0 3

P ro f e s s io na l e ng ine e rs ; s c ie nt is t s ; s up e rv is o rs ; t e c hno lo g is t s

1.2 5

Ele c t ric a l t e c hnic ia ns

1.2 4

Ins t rume nt t e c hnic ia ns M e c ha nic a l t e c hnic ia ns

0 .9 8

2 .13 1.54

1.4 2 1.2 5

1.6 8

0 .15 0 .11

M a int e na nc e t e c hnic ia ns

1.0 7 0 .8 9

N D T p e rs o nne l O t he r t e c hnic ia ns

4 .9 6

Ele c t ric ia ns

1.4 6

P ip e f it t e rs

0 .0 1

P la t e rs

0 .13

0 .3 4

M e c ha nic a l f it t e rs

1.2 4

0 .6 2

Ere c t o rs

0 .2 0

-0 .2 6

0 .0 0 0 .0 0 0 .0 3 0 .0 1

A s b e s t o s re mo v e rs S c a f f o ld e rs -0 .0 3 -0 .0 6

Ins ula t o rs & s he e t me t a l w o rke rs R ig g e rs

0 .0 0

-0 .19

W e ld e rs

0 .51

-0 .0 8 0 .0 0 0 .0 0 0 .0 3 0 .0 1 0 .0 4 0 .0 2

A rc hit e c t ura l o ut f it t e rs C ra ne d riv e rs F o rklif t d riv e rs -0 .0 5 -0 .0 8

S ho t b la s t e rs ; p a int e rs & d e c k s c re e d e rs

0 .0 0 0 .0 0 0 .0 0 0 .0 0

F ire p ro o f e rs Ind us t ria l c le a ne rs -0 .2 2 -0 .3 3

P ro d uc t io n p ro c e s s o p e ra t iv e s W o rking c ha rg e ha nd s

0 .9 8

Ot he r s it e s t a f f

1.2 9

0 .3 7

-0 .53 0 .0 0 0 .0 0

Ot he r

-1.00

0.00

1.00 Expansion demand

2.00

3.00

4.00

5.00

Net requirement

Figure 5.6: Replacement Demands onsite occupations–Alternative Scenario 1 Off Site 3 .7 2

M a na ge ria l

2 .6 3 6 .8 0

P ro f e s s io na l E ngine e rs

4 .8 5 4 .8 1

Inc o rpo ra t e d E ngine e rs

3 .2 0 6 .8 8

A dm inis t ra t o rs

4 .4 4 0 .0 1 0 .0 1

C le rk s

1.11

S upe rv is o rs

C ra f t pe rs o ns

0 .6 7 0 .0 4 0 .0 2

O t he r E m plo ye e s

0.00

1.5 8 1.0 2

1.00

2.00

5.54

1.74

0 .4 6

3.00

4.00

Expansion demand

5.00

6.00 [thousands]

Net requirement

61

7.00

8.00

6.00

Scenario 2 If some of the more bullish expectations are borne out then employment growth in the Contractor Community could be even faster than set out in Scenario 1. The second alternative scenario is summarised in Table 5.9 and Figure 5.7. Based on alternative assumptions discussed with ECITB, Scenario 2 assumes an overall increase in employment in the Contractor Community of just under 7% per annum between 2006 and 2014. Table 5.10 indicates the implications for demand by occupation for on-site staff. Table 5.11 shows the corresponding position for off-site staff.41 Figure 5.7a and 5.7b illustrate the trends for individual occupations. These substantial growth for many categories especially professional and incorporated engineers, as well as technicians of various kinds and many other skilled groups. Such a scenario would result in severe recruitment and retention problems for many contractors and could jeopardise the operations of many clients. The implications for replacement needs are shown in Table 5.12 and Figures 5.8 and 5.9. These would serve to exacerbate these pressures, resulting in very substantial needs for training to meet these total requirements.

41

As noted for the Benchmark Scenario, the historical data for clerks, administrators and craftpersons exhibit some discontinuities. These are reflected in the projections. Correcting the discontinuities would have implications for the projected values.

62

Figure 5.7: Overall Employment Trends – Alternative Scenario 2 Total employment trends 120.0

100.0

80.0 Total employment (default) Total employment (current) On Site Default Scenario

60.0

On Site Current Scenario Off Site Default Scenario Off Site Current Scenario

40.0

20.0

0.0 1996

1999

2002

2005

2008

2011

2014

Table 5.9: Overall Employment Trends – Alternative Scenario 2 Projected employment levels 2007 2008 2009

2010

(000s) 2011

2012

2013

2014

83.1

87.3

91.6

96.2

101.0

106.1

32.9 42.7

36.2 46.9

38.0 49.3

39.9 51.7

41.9 54.3

44.0 57.0

46.2 59.9

38.8

42.7

46.9

49.3

51.7

54.3

57.0

59.9

27.2

29.9

32.9

36.2

38.0

39.9

41.9

44.0

46.2

0.5 4.2 19.7

0.3 4.1 22.8

0.3 4.5 25.1

0.4 5.0 27.6

0.4 5.4 30.3

0.4 5.7 31.9

0.5 6.0 33.4

0.5 6.3 35.1

0.5 6.6 36.9

0.5 7.0 38.7

24.4

27.2

29.9

32.9

36.2

38.0

39.9

41.9

44.0

46.2

2004

2005

2006

All employment of which: on-site head office

57.2

55.8

62.5

68.7

75.6

22.9 34.3

24.4 31.4

27.2 35.3

29.9 38.8

Off-site (all broad occs)

34.3

31.4

35.3

All project types of which: Dismantle New Build Repair

22.9

24.4

0.2 3.9 18.8

22.9

On-site (all detailed occs)

63

Table 5.10: Employment Trends, onsite occupations – Alternative Scenario 2 Ctrl s forNavigation Panel

ON SITE

Managerial staff Incorporated engineers Prof enginrs; scientists; supervs; technlgts Electrical technicians Instrument technicians Mechanical technicians Maintenance technicians NDT personnel Other technicians Electricians Pipefitters Platers Mechanical fitters Erectors Asbestos removers Scaffolders Insulators & sheet metal workers Riggers Welders Architectural outfitters Crane drivers Forklift drivers Shotblasters, painters & deck screeders Fireproofers Industrial cleaners Production process operatives Working chargehands Other site staff Other All

1996

1997

1998

1999

2000

2001

2002

542 0 2320 654 411 478 0 137 847 665 2881 940 1429 2091 0 78 152 0 2076 0 152 33 115 15 115 320 777 3596 0 20823

498 0 2336 557 403 675 0 212 1090 652 2740 927 1571 1955 2 355 186 0 1792 28 134 20 220 28 76 464 801 4042 0 21762

715 0 2417 522 403 758 0 129 1022 674 2708 821 1541 2052 0 215 159 0 2168 19 140 48 253 68 76 471 973 3151 0 21502

563 0 2239 501 471 729 0 114 761 569 2587 887 1793 2312 0 347 88 0 1838 5 129 63 292 10 18 382 936 3776 0 21409

399 623 3264 901 662 1023 362 640 1156 790 3843 1172 2270 3201 0 437 100 0 2739 24 178 51 255 10 54 146 1112 4055 0 29466

734 630 2794 954 631 1037 277 265 1095 1188 3881 1129 2072 3021 5 106 377 0 2353 32 148 72 0 17 54 159 1391 4171 0 28595

577 757 2733 978 708 778 581 451 1880 1091 2942 1047 1739 2553 0 122 12 114 1985 0 160 25 103 0 43 216 1337 2608 0 25538

Historical employment levels 2003 2004 2005 614 491 2849 975 783 828 520 545 2016 1051 2537 970 1394 1245 6 374 95 938 1659 0 128 42 108 0 17 200 1112 3097 0 24592

744 279 2525 896 896 920 166 104 2034 1332 2124 724 1783 1663 4 205 115 223 1579 0 113 23 98 0 4 262 1202 2919 0 22935

782 258 2907 1027 874 1101 260 479 2347 948 1991 880 1818 1156 0 76 159 916 1678 0 132 63 91 0 44 147 1108 3135 0 24378

2006

Projected employment levels 2007 2008 2009

1280 320 3909 909 688 824 171 694 2762 1079 1741 865 2004 1317 0 88 155 872 1806 0 128 67 99 0 0 507 1115 3798 0 27199

1052 381 3780 1291 1116 1213 294 639 3292 1486 2282 996 2178 1531 0 139 107 770 1907 0 142 61 36 0 0 230 1503 3494 0 29920

1200 391 4202 1476 1300 1365 310 775 3971 1705 2338 1059 2378 1545 0 140 111 804 1999 0 150 68 35 0 0 235 1676 3681 0 32916

1365 399 4656 1683 1510 1530 327 935 4769 1951 2387 1123 2589 1553 0 141 115 837 2089 0 158 76 34 0 0 240 1863 3866 0 36199

2010

2011

2012

2013

2014

1478 389 4913 1828 1669 1634 328 1076 5446 2126 2321 1134 2684 1487 0 135 113 830 2079 0 159 80 31 0 0 234 1972 3865 0 38009

1595 377 5170 1979 1840 1740 328 1233 6193 2309 2249 1142 2774 1419 0 129 111 821 2063 0 159 85 29 0 0 227 2082 3854 0 39909

1718 365 5427 2138 2023 1849 327 1409 7015 2502 2174 1147 2861 1351 0 122 109 810 2041 0 159 90 27 0 0 220 2193 3833 0 41910

1846 352 5682 2302 2218 1959 325 1606 7911 2703 2095 1149 2943 1283 0 116 107 797 2015 0 158 95 25 0 0 212 2303 3801 0 44003

1978 339 5935 2474 2425 2070 323 1826 8883 2914 2015 1148 3020 1215 0 110 105 782 1984 0 157 100 23 0 0 204 2413 3760 0 46203

Table 5.11: Employment Trends, offsite occupations – Alternative Scenario 2 l s for Navigation Panel

OFFSITE GB

1996

1997

1998

1999

2000

2001

2002

2010

2011

2012

2013

2014

Managerial Prof Engineers Incrporated Engineers Administrators Clerks Supervisors Craftpersons Other Employees

4449 8548 4450 4225 4069 1022 998 758

4661 8170 4252 4591 4206 1094 1029 780

4935 9189 4394 4614 4273 1035 1038 685

4605 9165 4304 4783 3831 1115 1218 458

4556 7605 3835 4711 3166 442 512 371

5247 8409 3789 5254 3165 1097 569 786

5839 9496 4603 6623 3700 1609 985 1029

5437 9117 4302 6610 2730 1378 957 780

5047 7178 7201 9021 77 2629 1719 1406

5368 7357 5613 8323 61 2683 1172 863

5508 10156 6696 9304 15 1404 42 2131

6059 11172 7366 10235 16 1545 46 2344

6666 12290 8103 11260 18 1700 50 2579

7330 13516 8911 12383 20 1869 55 2836

7697 14192 9357 13002 21 1963 58 2978

8082 14901 9825 13652 22 2061 61 3127

8487 15649 10317 14337 23 2164 64 3284

8911 16430 10833 15053 24 2272 67 3448

9356 17252 11374 15806 25 2386 71 3620

28520

28784

30163

29478

25198

28316

33884

31311

34278

31440

35255

38783

42666

46922

49268

51731

54325

57038

59889

Total Employees

Historical employment levels 2003 2004 2005

64

2006

Projected employment levels 2007 2008 2009

Figure 5.7a: Employment Trends onsite staff – Alternative Scenario 2 Onsite occupational trends

Managerial staff Incorporated engineers

10000

Prof enginrs; scientists; supervs; technlgts Electrical technicians Instrument technicians

9000

Mechanical technicians Maintenance technicians 8000 NDT personnel Other technicians 7000

Electricians Pipefitters Platers

6000 Mechanical fitters Erectors 5000

Asbestos removers Scaffolders Insulators & sheet metal workers

4000

Riggers Welders 3000 Architectural outfitters Crane drivers 2000

Forklift drivers Shotblasters, painters & deck screeders Fireproofers

1000 Industrial cleaners Production process operatives 20 14

20 12

20 10

20 08

20 06

20 04

20 02

20 00

Working chargehands 19 98

19 96

0

Other site staff Other

-1000

65

Figure 5.7b: Employment Trends offsite staff – Alternative Scenario 2

Offsite Occupations 20000 18000

Managerial

16000

Prof Engineers

14000

Incrporated Engineers

12000

Administrators

10000

Clerks

8000

Supervisors

6000

Craftpersons

4000

Other Employees

2000

66

20 14

20 12

20 10

20 08

20 06

20 04

20 02

20 00

19 98

19 96

0

Table 5.12: Replacement Demands – Alternative Scenario 2 Replacement Demand:

Period: 2006 - 2014 On-Site Occupations

(000s)

Base year employment Expansion Occupational Replacement Net level demand Retirements mobility Migration demand requirement Managerial staff 1.3 0.7 0.3 0.0 0.0 0.3 1.0 Incorporated engineers 0.3 0.0 0.1 0.0 0.0 0.1 0.1 Professional engineers; scientists; supervisors; 3.9 2.0 0.9 0.0 0.0 0.9 2.9 Electrical technicians 0.9 1.6 0.3 0.0 0.0 0.3 1.9 Instrument technicians 0.7 1.7 0.3 0.0 0.0 0.3 2.0 Mechanical technicians 0.8 1.2 0.3 0.0 0.0 0.3 1.5 Maintenance technicians 0.2 0.2 0.0 0.0 0.0 0.0 0.2 NDT personnel 0.7 1.1 0.2 0.0 0.0 0.2 1.3 Other technicians 2.8 6.1 0.6 0.0 0.0 0.6 6.7 Electricians 1.1 1.8 0.3 0.0 0.0 0.3 2.1 Pipefitters 1.7 0.3 0.5 0.0 0.0 0.5 0.7 Platers 0.9 0.3 0.2 0.0 0.0 0.2 0.5 Mechanical fitters 2.0 1.0 0.6 0.0 0.0 0.6 1.7 Erectors 1.3 -0.1 0.5 0.0 0.0 0.5 0.4 Asbestos removers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Scaffolders 0.1 0.0 0.0 0.0 0.0 0.0 0.0 Insulators & sheet metal workers 0.2 -0.1 0.0 0.0 0.0 0.0 0.0 Riggers 0.9 -0.1 0.2 0.0 0.0 0.2 0.1 Welders 1.8 0.2 0.6 0.0 0.0 0.6 0.8 Architectural outfitters 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Crane drivers 0.1 0.0 0.0 0.0 0.0 0.0 0.1 Forklift drivers 0.1 0.0 0.0 0.0 0.0 0.0 0.0 Shotblasters; painters & deck screeders 0.1 -0.1 0.0 0.0 0.0 0.0 0.0 Fireproofers 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Industrial cleaners 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Production process operatives 0.5 -0.3 0.1 0.0 0.0 0.1 -0.2 Working chargehands 1.1 1.3 0.3 0.0 0.0 0.3 1.6 Other site staff 3.8 0.0 0.9 0.0 0.0 0.9 0.9 Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0 All On-Site occupations 27.2 19.0 7.4 0.0 0.0 7.4 26.4

Managerial Professional Engineers Incorporated Engineers Administrators Clerks Supervisors Craftpersons Other Employees All Off-Site occupations

5.5 10.2 6.7 9.3 0.0 1.4 0.0 2.1 35.3

3.8 7.1 4.7 6.5 0.0 1.0 0.0 1.5 24.6

Off-Site Occupations 1.1 2.0 1.7 2.5 0.0 0.5 0.0 0.6 8.3

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

1.1 2.0 1.7 2.5 0.0 0.5 0.0 0.6 8.3

Replacement Demand = Retirements + Occupational Mobility + Migration Net requirement = Expansion Demand + Replacement Demand

67

4.9 9.1 6.3 9.0 0.0 1.4 0.0 2.1 32.9

Figure 5.8: Replacement Demands onsite occupations– Alternative Scenario 2

M a na g e ria l s t a f f

1.0 4

0 .70 0 .12 0 .0 2

Inc o rp o ra t e d e ng ine e rs P ro f e s s io na l e ng ine e rs ; s c ie nt is t s ; s up e rv is o rs ; t e c hno lo g is t s Ele c t ric a l t e c hnic ia ns

2 .0 3 1.8 7

1.57

Ins t rume nt t e c hnic ia ns

1.74

M e c ha nic a l t e c hnic ia ns

1.2 5

2 .9 2

2 .0 0

1.53

0 .19 0 .15

M a int e na nc e t e c hnic ia ns

1.3 2 1.13

N D T p e rs o nne l O t he r t e c hnic ia ns

6 .12

Ele c t ric ia ns

1.8 4

6 .71

2 .13

0 .74

P ip e f it t e rs

0 .2 7 0 .50 0 .2 8

P la t e rs M e c ha nic a l f it t e rs

1.6 5

1.0 2

Ere c t o rs

0 .3 7

-0 .10 0 .0 0 0 .0 0 0 .0 5 0 .0 2

A s b e s t o s re mo v e rs S c a f f o ld e rs -0 .0 1 -0 .0 5

Ins ula t o rs & s he e t me t a l w o rke rs R ig g e rs

0 .11

-0 .0 9

W e ld e rs

0 .78

0 .18 0 .0 0 0 .0 0 0 .0 5 0 .0 3 0 .0 5 0 .0 3

A rc hit e c t ura l o ut f it t e rs C ra ne d riv e rs F o rklif t d riv e rs -0 .0 5 -0 .0 8

S ho t b la s t e rs ; p a int e rs & d e c k s c re e d e rs

0 .0 0 0 .0 0 0 .0 0 0 .0 0

F ire p ro o f e rs Ind us t ria l c le a ne rs -0 .19 -0 .3 0

P ro d uc t io n p ro c e s s o p e ra t iv e s W o rking c ha rg e ha nd s

1.3 0

Ot he r s it e s t a f f

1.6 2

0 .8 8

-0 .0 4 0 .0 0 0 .0 0

Ot he r

-1.00

0.00

1.00

2.00

Expansion demand

3.00

4.00

5.00

6.00

7.00

Net requirement

Figure 5.9: Replacement Demands onsite occupations– Alternative Scenario 2

Off Site 4 .9 4

M a na ge ria l

3 .8 5 9 .0 9

P ro f e s s io na l E ngine e rs

7 .10 6 .3 3

Inc o rpo ra t e d E ngine e rs

4 .6 8 9 .0 0

A dm inis t ra t o rs

C le rk s

6 .5 0 0 .0 1 0 .0 1 1.4 3

S upe rv is o rs

C ra f t pe rs o ns

0 .9 8 0 .0 4 0 .0 3 2 .0 6

O t he r E m plo ye e s

1.4 9

0.00

1.00

2.00

3.00

4.00

5.00

Expansion demand

6.00

7.00 [thousands]

Net requirement

68

8.00

9.00

10.00

8.00

5.4 Concluding remarks Even in the rather conservative benchmark scenario the prospects are for a considerable increase in demand for skills amongst the Contractor Community, especially if the focus is upon replacement needs. In the two alternative scenarios, both of which have some credence in the industry, these pressures would be accentuated. In the most bullish scenario employment would almost double and the demand for many skill categories would increase at an even faster rate. Meeting these demands will require substantial changes to existing training programmes as well as various other measures to avoid the negative consequences of emerging skill shortages and skill gaps (including measures to reduce wastage and encourage inflows into the community from other parts of the labour market. The results emerging from the projections are consistent with the messages which emerged from both the literature review and the interviews as discussed in Sections 2 and 3. In particular, they reinforce the concerns about the general demand pressures that are facing the Contractor Community, as well as the importance of an ageing workforce for replacement demands and the significant implications this will have for future recruitment and retention.

69

Annex A: Methodological Approach to Interviews A total of 25 detailed discussions were held with clients and contractors. Eight were with client companies (or those describing themselves both as a client and a contractor) and 17 with contractors. The discussions were conducted face-to-face (with the exception of one conducted by telephone following a client postponement of the initial meeting) and typically lasted an hour to an hour and fifteen minutes. The sample for the survey was supplied by ECITB, Cogent and SEMTA. Interviews were generally held with the Human Resource Director, though we also interviewed Managing Directors. In a number of cases the discussions were held with a number of senior staff present, often Operations Directors. There was a broad geographical spread of interviews which included companies based in Aberdeen, London, Teesside and East of England. Interviews were conducted by the project researchers from IER and IFF Research, using a semi-structured questionnaire.

70

Annex B: The Contactor Model B.1

Running the model

As may be seen from the Navigation Panel in Figure B.1 the model contains three different sets of assumptions affecting outcomes: • • •

Assumptions about the growth of activity levels; Assumptions about the changing structure of skill demand; Assumptions about the nature of replacement needs.

These are detailed below. Growth Assumptions Ideally these would relate to orders or output. But it has proven impossible to obtain reliable and consistent data on this. Neither has it been possible therefore to make measures of labour productivity. Changes in activity levels are therefore applied directly to employment levels. There is no obvious source from which to obtain such information. The numbers provided as defaults are therefore taken for the Working Futures set of national labour market projections.42 A selection of possible values is presented purely for illustrative purposes, to indicate the possible range of assumptions that might be used. Ideally expected growth rates should be used based on detailed knowledge of known order books and related information. Clicking on the ‘Growth Assumptions by Project Type’ button on the Navigation Panel takes the user to a sheet containing a series of growth rate tables. These are based on three different indicators: • • •

Employment growth in construction Growth in output in construction Growth in investment in construction

The default values for all three are derived from Working Futures. These should really only be used as a rough guide to possible future changes in activity level for the contractor sector. The model does not at present include a separate treatment of output, so the use of growth rates based on output assume that productivity growth is effectively zero. Investment as an indicator suffers from the same problems. It might be argued that investment in other sectors (effectively the customers of the contractor work force would provide a useful alternative indicator but this has not been operationalised in the current version of the model. Users are not restricted to these exogenous determined rates of growth. There is also an area for users to enter their own growth rates and thereby investigate various alternative ‘what-if’ scenarios. Given reliable information on orders in different product areas

42

Wilson et al. (2006).

71

(together with assumptions about the implications for labour demand, this could be used to construct a new scenario.

72

Figure B.1: The Navigation Panel

Notes: On-site/Head office excludes “off-shore”. Up to 2001 Project by type includes “offshore”. From 2000 onwards 2000 Detailed Occupations includes “offshore”.

73

An example of one of the Growth Rate tables is shown in Figure B.2. The rates run from 2007-2014 and are shown as proportions or ratios of the previous year’s level (a value