Professional Engineering

Overcome skills shortages

Skills shortages continue to affect the engineering sector, to such an extent that some firms are having to recruit from abroad. That has certainly been the case at TDK-Lambda UK, a maker of power supply units and converters, which employs 300 people at its facility at Ilfracombe in Devon. The company says it has found it increasingly difficult to recruit the number of power electronics engineers that it needs, forcing it to cast its net further afield.

General manager Phil Scotcher says: “We have a requirement for high-calibre power electronics engineers, primarily for design and mechanical packaging purposes, and unfortunately these people are difficult to find. 

“We now have a permanent advert on our website to attract people from all over the world. In 2011 we took on eight engineers – six came from overseas or were British citizens who had been educated overseas. We employ engineers from France, Italy, Malaysia and the Philippines. It is something that our HR manager has to work hard at.”

Scotcher says that TDK-Lambda provides relocation assistance to recruits from abroad, with existing employees often offering lodgings on a short-term basis. He says that, while settling into a new role in a foreign country can be difficult, staff retention has not been a problem. 

“Ilfracombe is a nice area and once staff relocate here they tend to stay with us for a long time. So that gives us a stable workforce. The disadvantage is that some people view the South West as a career cul-de-sac. But that’s not true – there are a lot of world-class companies down here.”

Looking forward, Scotcher doesn’t expect the skills shortage to relent. He says it is a long-term problem that poses real difficulties for a company that depends on product innovation to stay ahead of the pack. “We have more ideas than we have engineers for,” he says. 

“All the studies show that it is innovative companies who keep delivering new products that thrive and grow. Our speed of growth is limited by the number of new products that we can deliver. And that is potentially affected by skills shortages.” Scotcher feels that the engineering industry is still failing to get its act together on skills shortages. “It’s been a problem for a long time and it’s related to this country’s inability to get kids interested in science and technology. There are events like the Big Bang fair which shows young people what working for an innovative manufacturer is all about. But industry has to try harder to ensure that we make engineering attractive.”

TDK-Lambda is trying to do its bit. It sponsors undergraduates through university and provides career support for employees. “We have had several school-leavers who have joined us in factory or test positions and have shown aptitude that are now training to become engineers. Typically they were late starters who are keen to get on the development trail, and now they are studying for degrees. It’s important that we grow our own,” he says.

Find that elusive credit

According to manufacturers’ organisation the EEF, there has been some improvement in availability of credit for engineering firms since the recession, but the cost of finance remains high. The Office for National Statistics has found that in 2007 90% of approaches to banks for loans were successful – but this fell to 65% in 2010.

Mike Conroy, senior manager of strategy implementation at HSBC, points out that the proliferation of cheap credit in 2006-07 was abnormal. But in the era of Gordon Brown’s infamous “boom without bust” many believed the good times were sustainable. Conroy says: “We were living beyond our means, and then brought back to reality.

“If you’re the guy that’s slowly but surely living beyond your means it is a bit of a shock when someone eventually tells you that they’re not going to let you borrow any more.”

The banks had overstretched themselves and businesses counted the cost as the flow of credit dried up during the recession. Taxpayer-funded bail-outs were necessary for Lloyds TSB, Northern Rock and the Royal Bank of Scotland. HSBC escaped this fate, says Conroy, because it self-funded its lending rather than relying on raising finance on the wholesale markets. “This meant we just continued to lend as we normally did. In 2008 we actually grew our commercial lending by 10% – there wasn’t a question from our point of view of retrenchment. 

“But overall the market became more cautious.There’s no doubt that, for some businesses, the next time they had a meeting at the bank the bank manager was asking more questions than they had done previously. Now that’s not to say there wasn’t any funding available for good quality, well-run businesses. But it may have felt for some people that getting agreement to renew a facility or to extend it was a more rigorous process than it had been.”

So what are the prospects for firms seeking finance in 2012? Macro-economic factors will play a big part in how cautious banks are. Public spending cuts at home and the problems in the Eurozone mean that growth is likely to be negligible. Businesses may well opt not to seek finance as they struggle to negotiate choppy economic waters. 

For those looking for money, HSBC is especially receptive to companies seeking to open-up new markets overseas, says Conroy. “That’s where we see the challenge in many ways, and where the opportunities lie. If you’re struggling in domestic markets and demand from the US and Europe is weak, there’s an opportunity in some of the emerging countries in Asia and South America.”

Manufacturers, Conroy insists, are attractive to financiers. “We like manufacturers. Manufacturing is important for the UK overall. It’s often very easy to see where the revenues are coming from. It is certainly a good sector for banking. Manufacturing will be vital to the recovery and is likely to grow faster than GDP this year. But it’s going to be quite a long time, with these economic difficulties, before we see our way out of the storm.”