EEF, the manufacturers’ organisation – Written evidence

Overview

1. EEF, the manufacturers’ organisation, is the voice of manufacturing in the UK, representing all aspects of the manufacturing sector including engineering, aviation, defence, oil and gas, food and chemicals. With 6,000 members employing almost one  million workers, EEF members operate in the UK, Europe and throughout the world in a dynamic and highly competitive environment.

2. Skills are central to manufacturers achieving their ambitions on innovation, exporting and growing their business.[1] However growth plans continue to be restricted as companies struggle to access the skills they need. Three-quarters of manufacturers say finding employees with the right skills is one of their key business concerns and over half said it was their main concern. Moreover, four in five companies say they are currently experiencing recruitment problems.[2]

3. Manufacturers rely on the recruitment of graduates to help meet their skills needs, particularly those that hold degrees in the sciences, technologies, engineering and maths (STEM). Non-EEA students are included within this talent pool.

4. Government policy should not restrict this talent pool; however, it is our fear that current migration policy is doing just that. In particular, we are concerned around migration policy that impacts upon non-EEA students and graduates, especially those studying STEM subject or who have graduated with STEM degrees.

5. Of particular concern to manufacturers was the decision to abolish the Tier 1 post-study work route, which we believe should be restored. Alternatively, at the very minimum, the government should seek to explore potential avenues for international STEM graduates to stay in the UK for a period of time after they have finished their studies in order to secure employment. We discuss this in our response.

6. We also have concerns for the future. In order to meet the target of reducing net immigration to  ‘tens of thousands’  we are concerned that government might seek to restrict graduate entry into the UK labour market, upon which manufacturers rely. Restrictions have already been placed on students undertaking in-study work, and we call upon government not to make further restrictions in this area.

7. Moreover, we need to look at the bigger picture – the image UK plc is sending out to international students. The UK is a global leader in higher education provision, and we do not want to see this reputation hampered by migration policy. At a time where manufacturers are facing acute skills shortages, impacting their ability to win and fulfil orders, we need a migration policy that attracts as much highly-skilled international talent as possible, including STEM students.

Overall demand for STEM graduates

8. Manufacturing and engineering companies will have 2.74m openings between 2012 and 2020, of which 1.84m will need engineering skills. This means we need to double the number of recruits with foundations degrees, or degrees.[3] As such, manufacturers are recruiting graduates from within, and outside of the UK (See Chart 1), in addition to sourcing skills through other means such as apprenticeships.

Chart 1: Manufacturers are recruiting graduates within, and outside of the UK, % companies who have recruited or plan to recruit a graduate

Source: EEF Higher Education Survey 2013

9. Whilst predicting the skills-needs of the future can often be difficult, manufacturers are acutely aware of the skills their businesses need, and therefore have a preference for specific degrees to enable employers to build upon these skills. Unsurprisingly, graduates most in demand from manufacturers are those that hold a degree in an engineering discipline, with 63% of employers saying they had recruited engineering graduates in the past three years and 66% planning to in the next three years. The remaining ‘STEM’ disciplines – the sciences, technologies and maths graduates, were also in demand, with a particular focus on physical sciences and computer sciences. (See Chart 2)

Chart 1: Manufacturers demand for STEM graduates, %companies who have recruited or plan to recruit graduates.

Source: EEF Higher Education Survey 2013

10. As we identified in our Route to Growth report[4], manufacturers’ growth ambitions also focus on developing new products and services and tapping into new markets. As such, a third of employers say they have recruited a business and admin studies graduate in the past three years and three in ten expecting to in the future. However, for the purpose of this inquiry we will focus on STEM graduates.

11. The main concern manufacturers raise is whether their demand will be met by supply. In recent years we have seen a positive upward trend in engineering applications. Indeed UCAS data published in 2013 revealed that the number of 18 year olds applying to study engineering at university increased by 8.6%. UCAS end of year cycle for 2013 shows that whilst there were 15,577 acceptances for engineering, this represents only 5% of all acceptances.

Chart 3: Applications for engineering degrees has increased in recent years, Proportional changes in UK 18 year olds application rates by subject group (2010-2013)

Source: UCAS 2013 Demand for full-time undergraduate higher education (2013 cycle, March deadline)

The impact of migration policy on STEM supply

12. Whilst we can see then that the overall number of learners choosing to study STEM disciplines, specifically engineering, at university is on the rise, ensuring that this pipeline reaches employers is difficult due to migration policy. This is in addition to the numbers of STEM graduates that occupy non-STEM roles, when many moving into the service-sector for example where STEM graduates are also in demand.

13. Data from HEFCE has suggested that the proportion of international students from outside of Europe is particularly high in some areas of engineering – in 2011-12; at least 16% of students in all engineering sub-disciplines were international students. Moreover, international students accounted for 31% of undergraduate chemical engineers, and 22% of electrical, electronic and computer engineers.[5]

14. EEF’s own survey data shows that a quarter of manufacturers had recruited a non-EEA graduate in the past three years (See Chart 4). There is not always a specific preference to recruit a non-EEA graduate, but a result of not being able to access the skills domestically. However, manufacturers may seek to recruit from outside of Europe for specific language skills for example, particularly those that are seeking to tap into overseas markets.

15. Only one in ten specifically plan to recruit a non-EEA student in the next year, with seven in ten never considering recruiting a non-EEA student.  Whilst then manufacturers rely on international graduates, many do not tap into this talent pool. This is mostly likely to be the case if the company is an SME.  This may reflect the negative rhetoric surrounding recruiting non-EEA nationals, or the real, and perceived hurdles in terms of administration and cost of recruiting an international graduate.

16. In addition, graduate recruitment is just one channel through which manufacturers source skills. Two-thirds of our members for example plan to recruit a manufacturing and engineering apprentice in the next 12 months. Moreover, anecdotal evidence from our membership suggests that many companies are focusing their efforts, and investments in apprenticeships, which is likely to have an impact on graduate demand.

Chart 4: Manufacturers recruit non-EEA graduates and plan to in the future, %companies who have recruited graduates or plan to recruit, by domicile

Source: EEF Higher Education Survey 2013

17. There is a real need for government to make it simpler for manufacturers to recruit non-EEA students, as this is currently not the case. Almost half of manufacturers disagreed that the process of recruiting a non-EEA graduate was easy, and over half (53%) found the process very-time consuming. Worryingly, four in ten companies said they had difficulties securing a sponsorship licence and almost half had difficulties obtaining a visa for the graduate. (See Chart 5)

Chart 5: Manufacturers face challenges recruiting non-EEA graduates, %companies reporting ease of which they recruit non-EEA graduates

Source: EEF Higher Education Survey 2013

18. Yet manufacturers clearly value non-EEA graduates as in spite of these difficulties, a positive balance of 22% of companies say they would definitely hire a non-EEA student again. This reflects the value of knowledge and skills that graduates from outside of Europe can bring to the company, and also the difficulties companies continue to face finding high-level skills within the domestic labour market.

Making it easier to recruit Non-EEA Graduates

19. In our Skills for Growth report[6], we recommended that the government reinstate the post-study work route, widening the talent pool available for manufacturers. Since then, we have seen no movement towards considering this. Abolishing the post-study work route has meant that employers are recruiting from a smaller talent pool. This impacts particularly on SMEs and those companies that are not already sponsors. Graduates could previously transfer to a Tier 1 post-study work visa upon completion of their studies. This allowed those that had graduated from UK higher education institutions to remain in the UK for a maximum of two years to take-up employment, without needing a sponsor.

20. However, the government argued that the route was subject to abuse and subsequently closed to new applicants in April 2012. Since then the government has introduced a post-study work route, but this is limited to PhD students able to work for just one year upon completing their course. We have not seen any appetite to extend this route further. In addition, government has made it easier for graduate entrepreneurs to switch to Tier 2 and some to switch to Tier 5; however we do not see this having any real impact on manufacturers’ ability to fill their vacancies.

21. Whilst non-EEA graduates retain the opportunity to switch from Tier 4 (Student) to Tier 2 (Highly-skilled migrant)[7] visa for four months after graduation, it is highly unlikely those that are not already sponsors will be able to secure their sponsorship licence within this short timeframe. Therefore SMEs, often without HR departments, are disadvantaged as they are unlikely to be able to commit the time and resources to navigating through what is a complex, and time-consuming migration system.

22. There are alternative ways in which government could make it easier for industries with a high proportion of hard-to-fill vacancies to recruit non-EEA students. Government could use to the shortage occupation list[8] to identify which job roles are not being filled by the domestic workforce, and are therefore likely to require skilled migrant workers from outside the EEA. The majority are currently STEM occupations – in particular engineers and scientists.  This has been a consistent pattern since its introduction and demonstrating the demand for engineering roles further, the Migration Advisory Committee (MAC) last year advised that additional engineering occupations be included also. The MAC’s recommendation’s are evidence based, looking at a number of credible metrics to form conclusions. We fully support the recommendations MAC put forward and believe they reflect the current shortages within industries such as manufacturing and engineering.

23. The list could be expanded to graduates also, allowing international students studying disciplines that fall within these categories to stay in the UK for a period of two years after their studies to support them in seeking employment within these fields. This is not a radical proposal, indeed the Science and Engineering Graduate Scheme allowed non-EEA nationals who had graduated from UK higher or further education institutions in certain physical sciences, maths and engineering subjects with a 2.2 or higher grade to remain in the UK for 12 months after their studies or pursue a career without needed to secure, what was then, an Employer Sponsored Work Permit.

24. The other area of the Tier 4 (Student) route that is of interest to business and relevant to this inquiry is in-study work. Currently, students are allowed to work for 20 hours each week during term time, rising to full time hours during holiday periods. This provides a pool of labour for employers, particularly those based in and around university towns. This can be particularly useful if holiday times fall within peak periods of demand. Whilst this may be assumed to be in areas such as retail and hospitality, this can also occur within manufacturing particularly in sectors such as food and drink manufacturing. We would be concerned if further restrictions were placed on students that impacted their ability to work whilst studying.

25. To date, the use of Tier 5 has not been an issue raised by many of our member companies. However we have recently endorsed a potential new Tier 5 model that would support manufacturing and engineering companies, by helping them secure a non-EEA student wishing to undertake their placement in the UK.

26. We see potential opportunities within this. The demise of sandwich courses from UK higher education institutions has meant fewer companies are engaged in this way. Widening the talent pool to non-EEA students studying overseas gives companies the opportunity to access skilled undergraduates, and new graduates. This would be particularly useful for those companies wishing to fill growth ambitions such as exporting and tapping into new markets.     

14 February 2014

ANNEX

Overview of the points-based system