Where are the skilled workers?
Water companies are set to shed jobs, following Ofwat's price determination. But, as Dean Stiles reports, the UK desperately needs to invest in engineering and construction staff.Severn Trent Water (STW) has called on companies in the water industry to follow its lead and support training initiatives that bring "new blood" into the industry. The company is supporting the Government's recently launched engineering diploma programme.
The diplomas will become one of three mainstream education options, alongside GCSEs, A-levels and apprenticeships, and offer students the chance to study not only in classroom and college settings, but also in the workplace.
Tony Wray, chief executive of Severn Trent Water, says: "We have to invest in our future now and I'd encourage colleagues elsewhere in the water sector and beyond to add their support to this excellent initiative.
"We firmly believe that engineering offers a great career, and the water industry needs to encourage and develop a new generation of people with drive, enthusiasm and ideas to help take our business forward."
From September, STW also plans to support a number of 14-16 year-old students through Higher Science Diplomas. It will also provide support for a further 15 engineering diploma students in Derbyshire later this year.
A lack of apprentices being trained for construction and engineering jobs will spell disaster for the sector unless investment in training is made quickly, according to trade union Unite. Les Bayliss, Unite assistant general secretary, says fewer apprentices had been given construction and engineering jobs but that he was encouraged by government plans to provide more support for the industry.
He says: "However, this support needs to be up and running as a matter of urgency, as a boost in apprenticeships is vital to avert a UK skills disaster and the future prospects of our nation's young people."
Apprenticeships in the sector should be a priority to ensure school leavers have more opportunity to get construction and engineering jobs, he adds.
Last month, a spokeswoman for the Renewable Energy Centre said the engineering jobs to build 6,400 wind turbines around the coast of the UK would go to overseas workers unless the Government helped to bring skills up to standard.
Wray says: "One of our key strategic intentions is to ensure we have the right skills to deliver and we are investing at all levels to ensure that we secure a strong pipeline of skills and experience for the future."
His call comes on the back of comments from water consultants and contractors who fear jobs cuts in the industry following Ofwat's price determination. How much of this is posturing by water companies smarting after Ofwat's decisions is hard to assess, but United Utilities says it would cut 500 positions by the end of March, Welsh Water says it would cut 300 jobs over five years, and Pennon, owner of South West Water, declined to rule out compulsory redundancies to drive down costs. Thames Water and Anglian are among other companies thought to be considering cutting staff although these are expected in administrative roles.
It is hard to reconcile the threats of cutting staff with the amount and type of work required in the next AMP. And it is easy to forget, given the hype from water companies, that the final sum set for the AMP5 beginning in April is higher than the capital expenditure programme of any of the previous five-year regulatory periods.
Ofwat's final price determinations, published in November, earmarked £22B for capital expenditure by water companies. The final figure was £1.3B higher than the draft figure published in July, and 7% higher than the amount set for the previous AMP period.
All but Bristol Water have accepted the Ofwat determination that is significantly lower than the £27B companies asked for in their business plan proposals.
The investment programmes that firms settle on will show which issues the industry is prioritising, which projects are considered the best investments, where the opportunities are for the supply chain, and the size and expertise of workforce needed
AMP5 will see significant differences in the type of projects undertaken. Flood defence is an area of increasing focus for spending programmes.
Figures published by Ofwat show that £900M will be spent on delivering major projects, while £12.9B will fund maintenance and renewal of assets. What the water companies have to say about their own spending plans reflects these priorities: extensive pipeline replacements and treatment works upgrades crop up repeatedly.
The second largest area for investment is in water quality and environmental improvements, on which £4.6B will be spent. There will be greater emphasis on delivery of low carbon and, much less easily defined, more environmentally friendly operations as water companies adopt a stronger customer focus.
Terry Povall, utilities director at cost consultant EC Harris, says: "What we're seeing is a shift from major projects into capital maintenance schemes."
It is part of a trend that has seen the average cost of projects fall from £5M around the time of privatisation 20 years ago to just £100,000.
"It's a trend that's been going on and will continue to go on," says Povall.
Through smaller maintenance projects, water companies are seeking to add to the value of their assets rather than just remedy flaws. Any moves towards a low carbon water industry will if anything demand a greater range of skills, certainly among the engineers on the water industry workforce. Low-carbon projects require new skills that the UK does not have.
To make the transition to a low-carbon economy at the pace required to meet mandatory targets requires training arrangements in place to fill the gap. This is one of the key findings of a report from the Aldersgate Group, a strategic coalition of businesses, NGOs, think tanks and individuals, that believe that high environmental standards are essential for future economic growth and competitiveness.
The report, Mind the Gap - Skills For The Transition To A Low Carbon Economy, published last November, finds that, despite the UK's commitment to a rapid transition to a low-carbon, resource efficient economy, the Government's skills strategy is inadequate to meet these needs. It is now imperative that ambition and delivery are accelerated.
John Edmonds, Aldersgate Group project chair for the report , says: "The skills gap is well documented, with one in three firms already hampered by a shortage of skilled staff, from those needed to install new technology to scientists and engineers. Investment in low-carbon skills is vital if the UK is to build a more resilient and sustainable economy."
The skills shortage comes at a time when demand for engineers for major infrastructure projects is increasing as the UK attempts to address expansion in offshore and onshore wind, carbon capture and storage, nuclear power, flood defences, high speed rail and upgrading the water infrastructure.
"Many of the required skills identified in the report are not unique to a low carbon economy - it is a shortage of precisely these skills that has held back the UK economy for decades. In this respect, re-skilling for a low carbon economy involves a policy of no regrets. The UK needs to fix these skill shortage problems in order to prosper in the modern world," Edmonds says.
The report highlights that the most significant driver for low carbon skills is a robust industrial policy that encourages investment in low carbon technology and resource efficiency. Germany has shown how an active industrial and skills policy can help stimulate widespread economic growth and job creation. Responsibility for progress must be shared between government, businesses, trade unions, professional bodies, and the workforce.
The reports calls for government action to provide sufficient investment for training, to make training institutions identify and respond to the skill needs of the low carbon transition and for government to mobilise business engagement by providing initial funding programmes that can help alter long-term business practices and support in-house training programmes.
Under AMP5 we can expect a large number of small capital maintenance projects spread widely across large areas of the country - and this could mean changes to the way in which water projects are delivered.
Water companies will need to rethink the supply chain, says Povall. He believes they are likely to favour small local contractors over large national ones. There may also be a shift away from out-sourcing work with more done by in-house teams as water companies seek cost savings. Water companies and contractors will share the burden, and advantages, of providing relevant skills training but given the current financial constraints on government, the bill for training will fall on the industry.