THE BLACK HOLE IN AEROSPACE: SECTOR SKILLS SHORTAGE

THE BLACK HOLE IN AEROSPACE: SECTOR SKILLS SHORTAGE

Air traffic is increasing, and there is little reason to think that this will not continue. Every year since 2009 (following the global recession) passenger numbers have increased by between 5% and 8%. The industry is growing, and will continue to grow. But are enough engineers entering the industry to meet the increasing demand? For most experts, the answer is a resounding no. The aim of this document Using the latest data and opinions from the industry s leading experts, this paper will briefly examine how the industry is set to grow, and where the key skills shortages are. It will also look at the factors influencing the shortages, and potential solutions to this problem. For employers in the aerospace industry, this is a timely summary of an issue that may well get worse before it gets better. Continued growth: the global market Airbus predicts that air traffic will continue to grow annually at 4.7% over the next 20 years. That will necessitate 29,000 new passenger and freight aircraft valued at nearly $4.4 trillion. That s not forgetting the 10,400 planes that will need to replace existing ones over the same period. By 2035 it is predicted that there will be need for: 29,000 new passenger and freight aircraft 10,400 planes to replace existing ones 24,000 business jets 40,000 helicopters The UK market The UK has the world s second biggest aerospace sector, accounting for 17% of worldwide sales. This comprises more than 3000 companies involved in the aerospace supply chain, employing 230,000 people either directly or indirectly. The domestic sector is responsible for generating approximately 28 billion in revenue per year, 24.7 billion of which is through exports. Since 2011, the industry has grown 10 times quicker than the UK economy (enjoying 9.4% annual growth), with a further 6.8% growth expected over the next 2 years. The UK also has a large maintenance, repair and overhaul (MRO) sector and is responsible for 17% of the $45 billion global MRO industry. Domestic Sector Value Split MRO Trade organisation ADS also predict that 24,000 business jets, 5,800 regional aircraft and 40,000 helicopters will be needed. Much of the global growth will be driven be emerging markets. Currently only one fifth of populations in emerging markets fly annually, but this will rise to two thirds by 2032. And Airbus have forecasted that by 2032 Asia- Pacific will lead the world in air traffic, at which point global passenger numbers will hit 6.7 billion a year. To put that into perspective, it s double the current number. Freight 24.7bn Passenger 3.3bn Industry growth has been quicker than the UK economy 9.4% 6.8% Since 2011 Predicted next 2yrs Within the repair and overhaul (MRO) The UK holds 17% of the Market worth $45bn Due to this growth, the UK has become a victim of its own success. The Institute of Engineering and Technology (IET) has estimated that 87,000 new engineers will be needed each 2 carbon60global.com

year until 2020 to keep pace with this expected progression. As of 2012, only 23,000 graduates majored in engineering, falling well short of the target. Continued shortages To maintain this upward curve, the UK evidently needs to develop far more engineers than it is at present. According to the Employer Skills Survey in 2011, 59% of employers are concerned that a scarcity of engineers could pose a threat to their business in the future. The same survey showed that 32% of engineering vacancies are considered hard-to-fill, approximately twice that of the UK average. Furthermore, nearly half (48.3%) of engineering enterprises said that recruitment difficulties had caused delays in developing new products and increased operating costs. This tangible effect is one that will continue into the future if the deep-rooted issues surrounding engineering education are not addressed. A lack of specialists 59% of employers are concerned that a scarcity of engineers could pose a threat to their business in the future Aerospace is one such area which causes great concern. Modern aircraft are becoming increasingly complex, placing greater emphasis on the need for very specific engineering skillsets; those which are not being developed in large enough quantities. For example, engineers with composite material experience are in exceptionally high demand. This is largely due to the industry s growing focus on its environmental impact composites make aircraft more fuel-efficient. Elsewhere, the government s Migration Advisory Committee have recently determined that job titles such as manufacturing engineer, stress engineer and aerothermal engineer should be placed on their shortage occupation list. Also on that list are various specialisms within electrical engineering a field that is facing the dual challenge of rapid growth in demand, and rapid decline in graduate supply. Job titles argued to be in shortage within the aerospace industry General description Electrical engineers Production and process engineers Engineering professionals Buyers and procurement officers Aircraft maintenance and related trades Specific job titles Electrical machine design engineer Power electronics engineer Manufacturing engineer (process planning) Manufacturing engineer (purchasing) Chief of engineering Stress engineer Aerothermal engineer Advance tool and fixturing engineer Manufacturing engineer (purchasing) Licensed and military certifying engineer/ inspector technician Other experts have pointed to the lack of engineers in specialist areas that require a multi-disciplinary approach. Systems engineers are just one example. They typically require a great deal of technical knowledge, but also need strong experience in project management and other human-centred disciplines. This mix of ability is not built, or recruited, easily. Interestingly, the same report suggests that there is no evidence to support a shortage among mechanical engineers. But this view reflects the fact that mechanical engineering as a sub-discipline has seen the biggest annual increase in graduate numbers in recent years. Last year, mechanical engineering graduates increased by 14.5%, whereas manufacturing engineering graduates increased by only 1.6%. Some of the causes Lack of science, technology, engineering and maths (STEM) graduates Due to the high-skill nature of aerospace roles, degree-level qualifications are expected for white-collar positions, making graduates in the sector highly employable. Within six months of graduating, 77.5% of nationwide engineering graduates enter employment a figure almost 20% higher than the average across all subjects. While the demand is clearly there, there is a deep-rooted problem within the supply chain. 3 carbon60global.com

The Royal Academy of Engineers said in 2012 that 104,000 STEM graduates were needed every year until 2020 to maintain the status quo. Although engineering graduate numbers have increased by 12% since 2012, only 104k STEM Graduates are needed each year 82,000 STEM students are graduating each year, far below the necessary level. One revealing problem is that the first year non-continuation rate for engineering and technology degrees is 15.6%. This is well above the national average for other subjects. While this suggests that these students lacked the knowledge for the course, it is possible that a lack of sufficient education at a lower level could be a contributing factor. Problems at school As with most recruitment problems, the fundamental causes go a long way back. School children have typically underperformed in GCSE science and maths in recent years. And unsurprisingly, A-level science take-up has remained stubbornly low. Reasons for this are varied, but some worrying trends in teaching quality could be significant. For example, only 45% of secondary school maths teachers have a degree, while 34% of physics teachers don t have a relevant post A- level qualification. These statistics allude to the lack of teachers within STEM subjects, and therefore a dependence on under-qualified and overworked teachers from other, less relevant disciplines. Retiring engineers 22k Shortfall of STEM Graduates each year The average age of an engineer in Britain is 54. That s the fundamental issue that underpins the looming skills shortages. Experts have called it a retirement cliff in engineering, and it will mean that a huge number of engineers will need to be replaced. But it s far more complicated than that. In aerospace, the key shortages are in very specific areas, demanding skills that take many years to develop and refine. These skills not only need to be replaced; they need to be passed on. Apprenticeships in the near future are therefore a vital part of the solution. Apprenticeship take-up remains low 56,000 engineering apprentices are needed every year until 2022. In 2012/13 the actual figure was 25,978 According to Engineering UK s annual report, 56,000 engineering apprentices are needed every year until 2022. In 2012/13 the actual figure was 25,978 less than half of what s needed. Clearly apprenticeships are vital to the aerospace industry, because it s a sector that relies on skills that can only be developed onthe-job. The number of apprenticeships undertaken is increasing every year, but greater rates of increase are needed. Limits to recruiting from abroad With India producing eight times as many engineers as the UK, and China 20 times as many, one of the solutions inevitably lies in UK India China recruiting from abroad. However, the engineering shortage is actually a global problem, and countries will increasingly be doing more to hold on to home-grown specialists. Government plans to reduce immigration will exacerbate the problem. Plans to reduce non- EU immigration could be particularly damaging, given that so much of the world s future engineering talent will come from India and China. That s not forgetting the EU Referendum that s on the horizon, which could 4 carbon60global.com 1 8 10

have huge ramifications for European recruitment. Then there s the issue of visa restrictions. A visa to work beyond four months after graduating in the UK requires a job that pays at least 20,300 a year. That rules out most apprenticeships and many entry-level engineering positions. In certain areas the required salary is even higher much-needed electrical engineers, for example, must earn 23,600. These restrictions seem ridiculous given the shortages that are currently faced. Meanwhile, the consistently high tuition fees and anti-immigration rhetoric are pushing international students away from the UK. For example, in 2013 there was a 25% drop in the amount of students coming to the UK from India and Pakistan. Lack of female engineers Offering flexible, part-time, work-sharing and phased retirement options will help to retain key skills for longer More needs to be done in terms of apprenticeships and mentoring, in which senior engineers can train others Meaningful incentives need to be offered to senior engineers in return for sharing their knowledge Develop long-term strategies The widespread concern within engineering businesses has led to 74% developing strategies to address the talent shortages. 8% Partnering with Educational Bodies 13% New Recruits Developed 6% Other Engineering desperately needs more women, but the statistics are damning in this area. 25% Talent Sourcing 38% Staff Training The UK has the lowest proportion of female engineers in the EU at 10%. The IET recently stated that there has been no significant increase in the number of female engineers in the UK in the last three years. Another survey found only 2% of parents would like their daughter to become an engineer. This is a complex and serious limitation to the long-term engineering supply chain. Possible solutions It s not all bad news. The UK has the lowest proportion of female engineers in the EU at 10%. Employers and think-tanks are already finding effective ways of coping with this challenge. Work creatively with senior engineers While the focus will inevitably be on graduates, it may be older engineers that hold the key to this problem. After all, in aerospace the difficulty is finding people with specialist skills; the skills senior engineers possess in abundance. A further 20% have adjusted their work models by redesigning working procedures and focusing on improving their talent pipeline. Worryingly though, the same study reports that 26% of employers have no current strategy to address these talent shortages. Create multi-faceted graduate schemes and apprenticeships Clearly, graduate schemes and apprenticeships need to be improved to attract and develop much-needed engineering specialists. But more emphasis must be placed on graduate schemes that provide hands-on experience in numerous disciplines and departments. Some companies are reaping the benefits from doing precisely this. Cabin furniture designers Zodiac Seats UK offer graduates four different three-month experiences from a choice of 10 within the company. Not only is this interesting and varied for graduates, but it s helping to fill niche positions for Zodiac. This example should be replicated, but needs commitment from all relevant parties universities and colleges, government and 5 carbon60global.com

employers. The problem is shared, so the solution must be too. Engage with schools Employers need to work harder to offer teenagers placements and work experience as early as possible. The Department for Education has found that children who have direct experience of the labour market at age 16 or 17 are more likely to be in full-time employment as adults. And Engineering UK states that employer engagement in education has profound and long-lasting consequences for young people. So, if employers want young people to fill their skill-gaps in the future, they have to take responsibility for introducing them to engineering today. Tomorrow s Engineers, for example, led by Engineering UK and the Royal Academy of Engineering, is an initiative that aims to inspire the next generation. Working with businesses, charities and not-for-profit organisations, their goal is to educate young people about the benefits and opportunities in studying STEM subjects. Their schools programme reached out to over 40,000 young people throughout 2014, including activities such as visits, workshops and career days. It is hoped that this initiative will encourage a larger number of engineering graduates in the future. Assess salaries The average salary for an aerospace engineer is currently just under 31,000. This is around 5,000 higher than the average UK salary. Meanwhile engineering graduates can expect higher starting salaries than graduates from the majority of other subjects. Only 30% Engineering graduates end up working for companies whose primary activity is engineering Despite this, engineers consistently complain about low pay. Specialist engineering recruiter Roevin explained that engineering salaries fell by 7% between 2013 and 2014. Therefore, many engineering graduates take their skills to other, more highly paid industries early on in their career. The Engineer has suggested that only 30% of engineering graduates end up working for companies whose primary activity is engineering. The point is, if employers are desperate for highly skilled specialists, they need to address what these skilled specialists are concerned about. And in many cases, that concern is pay. Recruit more women Only 10% of Britain s professional engineers are women The problem of the lack of women in engineering is obviously also a huge opportunity. Only 10% of Britain s professional engineers are women a staggeringly low amount. But what is holding women back from the industry? More than anything else, research suggests it s the industry s reputation. And reputational issues start at home there s an undeniable need to make engineering more attractive to parents of young women. Fixing this reputation must start by raising awareness, and that is beginning to happen. The lack of female engineers is now regularly reported within mainstream media. Beyond this, many experts have cited the lack of female role models as a barrier. The problem of course is cyclical, because without female engineers, there are no role models in the first place. But the industry needs to do a better job of celebrating the success stories of female engineers. A good example of this is the Royal Academy of Engineering s recent report Britain s got talented female engineers. Through the personal journeys of a number of female engineers, it shows just how and why engineering can be an extremely fulfilling career for women. These first-hand stories could be vital in helping to sway the opinions not only of young women, but their parents too. Government backing Despite strong controls on public spending, the government continues to offer strong support for science and engineering. 6 carbon60global.com

The Chancellor has increased investment in the industry, including a long-term commitment to investment in science infrastructure of 1.1 billion in real terms to 2021. This brings overall investment in science and research to 5.8 billion for 2015/16. Summary: A shared problem The issue of skills shortages in aerospace engineering is being consistently exacerbated by growth. Indeed, much of the excitement surrounding the growth of the sector is premature given the impending recruitment headaches. In short: Not enough young people are becoming engineers, or studying STEM subjects in the first place The industry is relying too heavily on a large number of senior experts who are set to retire within the next 10-20 years Aerospace is lacking skilled specialists in areas like composites disciplines that require a great deal of knowledge and experience The shortages are global, and recruiting from abroad is not a long-term solution One of the biggest opportunities lies in recruiting more female engineers During the 2013/14 financial year, UK recruitment agencies were responsible for 635,000 permanent placements across a variety of sectors. On any given day during 2014, 1.15 million Britons were on contract assignments through an agency. Furthermore, of the 1.15 million daily contract vacancies, blue-collar and technical engineering roles made up 21.1% and 15.3% of total agency hires respectively. All of these figures suggest that recruitment agencies have an important role to play in helping businesses solve the engineering skills shortage. And given the abundance of contract vacancies within the industry, businesses should think seriously about working with agencies to prevent costly staffing delays. And perhaps the most noticeable problem with the response to this challenge so far is that it has been too fragmented. If this significant and complex problem is to be solved, it will require the integrated efforts of government and industry. Responsibility must be taken on both sides. How recruitment can help Globally, it is estimated that by 2019, 5.9% of the global working population will be unemployed some 212 million people. Despite this huge excess, there is an evergrowing mismatch between the skill-sets in demand and those that are looking for work. In the UK, the unemployment figure remains at 5.7% (1.86 million people), yet 38% of UK employers have experienced difficulties in filling roles. 7 carbon60global.com

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