Productivity gaps, strikes threaten UK process engineering projects
1 Dec 2009
London - Poor productivity and labour relations issues could block the UK engineering construction industry from taking advantage of significant opportunities likely to arise over the next 10-15 years, warns a new government-commissioned report titled Changing to Compete - commissioned in the wake of the recent labour unrest at Total’s Lindsey oil refinery.
The review highlights huge growth potential for the sector on the back of anticipated increased investment in nuclear and other power generation, carbon capture & storage, biofuels and other low carbon technologies in the UK. The current stock of plant in these sectors and in the oil & gas and chemicals sectors also offer major opportunities as they continue to need investment for repair, maintenance and upgrading.
However, as productivity between UK projects is “very variable”, exploiting these opportunities will need a concerted response by the industry and Government support The report indentified a large gap between the best and worst performing projects (+/- 30%) - much greater than the productivity gap between the UK and other countries, for example the US Gulf Coast where projects were 11% more productive than similar projects in the UK.
The review also found that recent unofficial disputes have lowered productivity and damaged the reputation of the UK industry. And where a project under-performed in productivity terms compared to the average in the UK or to other countries, this was likely to be due to the way in which the project was managed.
“Although clients and contractors knew about good practice in project management, they did not always use it,” according to Mark Gibson, Chief Executive of the Whitehall and Industry Group, who led the review team. He wants to see more focus on using and sharing knowledge about good practice. Clients and contractors, he added, should talk to each other about this more than they currently do and should look outside the industry to learn from others such as automotive and aerospace.
On the plus side, the review found that the UK industry is highly skilled. A UK engineering construction welder, for example, is likely to be as skilled as one anywhere in the world. This reflects long term investment in quality training by the industry. However, employers and Government were urged to invest more in training to address the projected large shortfall in numbers of skilled people in the future. In particular, it said, more funding is needed for apprenticeships (the average age of the current workforce is over 50.
No evidence was found of deliberate mis-application of the national rules on pay and conditions or evidence of foreign contractors undercutting UK ones on price or skill levels. In some cases, projects have benefited from the use of foreign contractors and labour.
Poor industrial relations in recent years are due to a breakdown in trust between employers and employees, the Review found. So-called “un-procedural actions” which damage productivity are one manifestation of this. The Review concludes that employers and employees need to work harder on effective engagement with one another.
“This is a very important sector of UK industry, vital to the building of our future national infrastructure and to our move to a low carbon economy,” said Gibson. “I have produced recommendations for change based on this consultation and am delighted that there has been agreement on many of my proposals. “One is for the setting up of a Forum involving clients, contractors and trade unions to oversee implementation of the recommendations.
Ian Marchant, chief executive of Scottish and Southern Electricity, who has agreed to chair the new Forum, said: “The UK’s engineering construction industry needs more people with more skills and better productivity if it is to play a full part in the transformation of the UK’s power stations, oil refineries and chemical plant that we will see over the next two decades.
“A key risk to the overhaul of the country’s asset base is that it lacks the engineers to do the work. Over the next 18 months, I expect the new Forum to set out a practical and comprehensive plan to turn this risk into an opportunity for the UK to improve skills, create jobs and provide work for a growing number of successful engineering construction companies.”
The report was welcomed by Michael Hockey, managing director of the Engineering Construction Industry Association: “This Report provides us with a valuable opportunity to improve our industry’s performance and to address our skills issues.”
Likewise, on the trade union side, Tom Hardacre, National Official, Unite Union, said: “I welcome the publication of the report and that Government is taking seriously the fact the UK engineering construction industry is critical to the UK’s future investment in vital infrastructure, not least the planned programme of new build nuclear power stations.
“In my opinion it is vital that we have a good stable industrial relations framework that should support security of employment for the workers who will play a major role in the success of future major projects.”
