Industry's success is reliant on process of finding new recruits

THE process industry is the beating heart of the North-East business community.

THE process industry is the beating heart of the North-East business community. The sector currently pumps almost £9bn into the UK economy every year – and that figure is set to rise by a further £5bn in the next five to 10 years.

The region’s process industry employs 34,000 people directly and impacts indirectly on the income of a further 280,000. The North-East is home to almost two-thirds of the UK’s petrochemicals industry and 35% of the UK’s pharmaceutical industry.

The process industry is the UK’s highest exporter at £31.8bn with the North-East region being among the largest contributors.

And as the region’s process industry expands, so does the demand for new recruits.

About 20,000 jobs could be created in the sector in the next few years. And the industry currently also needs 1,000 new apprentices.

But Stan Higgins, chief executive of the North East Process Industry Cluster, says it's essential to look more closely at the figures to reveal the region's true potential. And explains why new skills are vital to the sector's future success.

THE importance of the process industry to the North-East economy has always been under valued due to the way economic data is collected.

To understand the economic impact of any industry in the UK many use the Standard Industrial Classification of Economic Activities (SIC Codes) which classify business establishments and other organisations by the type of economic activities they are engaged in.

These codes seem to work rather well in giving an overall picture of the UK economy.

However, they do not work at all well in a regional context.

A good example is the process industry in the North-East of England, the importance of which is very much underestimated using this system.

There are several problems that arise.

The SIC forms are often updated by head office personnel with company data collated form several locations in a multi-site business.

This still enables the SIC codes to give a good overall picture of the national economy but not a good regional break-down.

This is one reason there appear to be more chemical industry workers in the City of London than on Teesside!

The headline measure of a region’s economic performance is the level and growth rate of Gross Added Value (GVA) which measures the contribution to the economy of each individual producer, industry, or sector in the UK.

At regional level, GVA is defined in terms of the total income earned by individuals (e.g. wages) and corporations (e.g. profits) in the production of goods and services.

It is the second part where the North-East begins to struggle for the following reasons:

Many of the large businesses based in the region are not head office locations, so the jobs and GVA generated can be reported elsewhere.

A good example of this is the pharmaceutical industry.

The region has 10 fully operational pharmaceutical manufacturing operations making 33% of the UK’s £3.6bn Gross Domestic Product in pharmaceuticals and employing 5,000 people.

Several of these factories are not recorded as being in the North-East at all in the government statistics.

In another example, SIC codes also suggests that only 12,000 people work in the chemical sector in the whole North-East region when there are more than 14,000 working for companies on Teesside alone.

Anecdotally, we understand that in excess of 30,000 people say they work in the process industries in the North-East when they complete the national census.

The second problem comes from the nature of the businesses based in the region.

As a percentage of regional GVA, the North-East has a higher than average level of investment from foreign-owned companies than any other English region – 3% compared to the average for England of 1.5%.

This then means a significant amount of GVA, arising from these investments, does not get reported in the region.

What the statistics do show is the average GVA per head of population in the North-East is about £14,000 with the UK average being £18,000.

If you just take those that are in employment, then the figures increase to in excess of £35,000 per employee. On the other hand, those working in the process industry are creating in excess of £60,000 average GVA per employee.

With more than 30,000 people currently employed in the process sector in the region, this represents about £2bn of GVA to the regional economy every year. Consequently even while underestimated the process sector creates a third of the of the £6b of GVA from all manufacturing in the North-East region.

Furthermore, the process industry sector is growing significantly. March 2007 was its biggest sales month for the UK chemical industry in both volume and price and now this growth is evident in the North-East of England. We have seen the recent announcements of major investments in biofuels plants, polyethylene, polypropylene, titanium dioxide and a plethora of related new power plants by SembCorp, Centrica and others.

Due to both this growth and the demographics of the process Industry, NEPIC member companies have in a recent survey determined that they will recruit 16,000 new people to the industry over the next eight years. This will result in approximately 8,000 replacement jobs and 8,000 new jobs over the period. Interestingly these jobs are equally divided into 8,000 science and engineering graduates and 8,000 vocationally trained staff.

This growth means the direct work force will grow by 8,000 to 42,000 by 2015.

This intense period of recruitment will bring a further £2.2b of cumulative GVA through the next eight years. These new workers will support the current investment programme by the industry in the region. NEPIC and its partners are working to deliver over 50 investment projects that total more than £5.5b of process industry investments all potentially destined for the region.

Journalists

David Whetstone
Culture Editor
Graeme Whitfield
Business Editor
Mark Douglas
Newcastle United Editor
Stuart Rayner
Sports Writer