Engineering UK 2018

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Engineering UK 2018Synopsis and recommendations

SynopsisSynopsisEngineering UK 2018: The state of engineeringSynopsisEngineering plays a vital role in the UK’s economic and societal wellbeing, providingquality employment on a large scale and some of the key solutions to major globalchallenges. In the face of technological advancements and a changing political andeconomic landscape, developing the pipeline to address the skills needs of theengineering sector remains a key challenge.The engineeringfootprintTo further improve the precision of the engineering footprint,jobs within the footprint were furthermore classified ascore or related.Core engineering jobs were defined as engineering roles thatrequire the consistent application of engineering knowledgeand skills to execute them effectively. Core engineering jobsinclude those that are self-evidently engineering: theengineering professionals ‘minor’ group of civil, mechanical,electrical, electronics, design and development and productionand process engineers. The ‘core’ definition also includesthose who require consistent use of engineering competences– for example, a draughtsperson or a welder.Because the boundaries of what constitutes engineering areoften blurred, determining a clear definition of engineeringcan be difficult, with different organisations historicallytaking different approaches. To aid consistency, in 2017 theEngineering Council, Royal Academy of Engineering andEngineeringUK reviewed and updated the list of jobs andindustries deemed to constitute engineering. The footprintused in this report reflects this revised version.The Engineering Council, Royal Academy of Engineering andEngineeringUK agreed to standardise the footprint using abinary approach, whereby an industry sector or an occupationis considered to be wholly in or out of the footprint. A set ofcriteria regarding the level of qualifications and skills deemedto be required for engineering roles was agreed and anextensive review of standard occupational classification (SOC)and standard industrial classification (SIC) lists undertaken.Engineering sector1ngineering jobeeorEngineering jobs inengineering sectorReRevisions to the engineering footprint mean that figuresconcerning the engineering footprint in this report are notcomparable to previous reports – but will enable consistencyacross the sector going forwards. Where time series arepresented in the report, these figures have been recalculatedto reflect the revised engineering footprint and are intendedto be compared.sCAs a result of this review, 10 job titles were removed from thefootprint, three were added and four remained with input fromexternal organisations. Fourteen industries were removedfrom the list of SICs and two were added.Meanwhile, related engineering jobs were defined as thosethat require a mixed application of engineering knowledgeand skill alongside other skill sets, which are often of greaterimportance to executing the role effectively. An architect isan example of a related engineering ted eEngineering jobs innon engineering sectorn g i n e e ri n gjobrise in number6%of UK engineeringenterprises between2015 to 2016EconomyOur findings unequivocally demonstrate engineeringis a critical part of the UK economy, both in respect ofdirect contributions to turnover and employment and its‘multiplier’ effect.ProductivityProductivity is a key factor in the standard of living in a nationaleconomy, with higher levels meaning improved economicgrowth and a more prosperous society, with attendantincreases in funding for public services. That the UK has seenits productivity decline below that of competitor nations hasbeen a long-standing concern for policy-makers andemployers alike.19%Manufacturing enterprises within the engineering footprintremain the largest economic contributor of the engineeringbased industries, generating 156.1 billion GVA (or 9.3% ofthe GVA for all industries) in 2015. Indeed, in 2016 almost halfof the engineering footprint turnover came from manufacturing(46.5%). But contributions from other engineering sectors werealso considerable: the construction industry generated GVA of 62.9 billion, IT, telecommunications and other informationservice activities 85.4 billion, and mining and quarrying 16.2 billion in 2015.One of the more visible contributions of engineering to UKproductivity is the construction of new national infrastructure.In July 2016, the government major projects portfolio had143 projects worth over 455 billion. Skills found in theengineering footprint are needed for projects in everycategory in the portfolio.While the causes of the UK’s poor productivity record arecontested, it is clear that simply hiring more workers will not beenough to achieve a step change: the productivity of existingemployees also needs to be improved, both throughinvestment in technology and skills, and the strengthening ofthe educational pipeline.Our findings show that engineering is a crucial sector forraising the UK’s productivity levels. Research by the Centrefor Economics and Business Research (Cebr) onEngineeringUK’s behalf found that the engineering sectorhad a strong multiplier effect on the economy, generatinga further 1.45 Gross Value Added (GVA) for every 1 GVAcreated directly in the engineering industries. What’s more,every additional person employed through engineering activitywas projected to create a further 1.74 jobs down the supplychain. Overall, they estimated that the engineering sectorgenerated 25% of the UK’s total GDP in 2015 ( 420.5 billion).of UK total workforceemployed in theengineering sector27%of registeredenterprises inthe UK were in theengineering sectorNon engineering sectors2

SynopsisSynopsisEngineeringgenerated 23%1.74 jobssupported by everyperson employedin engineering( 1.23 trillion) of theUK’s total turnover(a multiplier effect of 2.74)Engineering enterprisesAnalysis by the Office of National Statistics for EngineeringUKindicates that just over a quarter (26.9% or 687,575) of the 2.55million registered enterprises in the UK in 2016 were in theengineering sector, representing a 5.6% growth in terms of thenumber of enterprises over the previous year. Moreover, thisyear-on-year growth was observed across all industries withinthe engineering footprint. Reflecting the growing trend indigitalisation, the information and communication industrysaw the largest increase in the number of engineeringenterprises, growing by 7.6% over the last year and 40.8%over the last 5 year period.EmploymentPerhaps unsurprisingly, given its share of enterprise, theengineering sector employs a significant proportion of theoverall UK workforce. In 2016, just under one in five (18.9% –or 5.66 million) people in the UK workforce were working in atan engineering enterprise. Those working in an engineeringenterprise were most commonly employed in manufacturing(42.3%), followed by information and communication (19.5%)and construction (17.2%).In respect of employment, it is clear some industries, such asinformation and communications, are expanding while others,notably mining and quarrying, are in decline. Also evident is thestrong contribution EU nationals make to the engineeringworkforce. Data from the Labour Force Survery shows that7.7% of workers in EngineeringUK sectoral footprint in 2016were EU nationals, compared with 6.1% in non engineeringsectors. And in the first quarter of 2017, EU nationals madeup a higher share of the workforce in key engineering-relatedindustries such as manufacturing (11.5%), construction (8.7%)and professional, scientific and technical activities (8.1%)than in the labour force overall (7.3%).TurnoverThe economic contribution of these engineering enterprisesto the UK economy is significant. For the financial year March2015 to March 2016, engineering enterprises registered forVAT and/or PAYE in the UK generated 23.2% ( 1.23 trillion)of the UK’s 5.3 trillion total turnover from all registeredenterprises.3157,000Skills needsThe world of work is changing, with a growing trend ineconomically developed countries toward an hourglassshaped economy. Technological advances have been key tothis transformation, resulting in the expansion of knowledgeintensive services and increased demand for highly skilledlabour. As we move further towards an hourglass economy,fuelled by the fourth industrial revolution, there are clearimplications for the engineering sector and its skills needs.In the two decades to 2014, the number of high-skilled jobs inthe UK has risen by 2.3 million and, in some sectors, employersare routinely reporting that they are struggling to fill positions.61% of businesses surveyed in the CBI/Pearson Education andSkills Survey expressed a lack of confidence that there will beenough people available in the future with the necessary skillsto fill their high-skilled job vacancies. Shortages in highlyskilled labour are expected to be exacerbated by the growthof new industries, some of which scarcely yet exist, emergingfrom new technologies and knowledge.Emerging industriesIn all engineering related industries, there is a trendtowards increased automation and connectivity. Illustrativeof this is the tremendous growth observed in informationand communication, with turnover generated from theindustry reaching 198 billion in 2016, a 23.5% increasefrom 2011 levels.Meanwhile, the big data sector continues to grow. It is forecastto contribute 241 billion to UK GDP by 2020 and to create157,000 new jobs. Going ahead, strong growth is also expectedacross the architecture and engineering job family, with 3Dprinting, resource-efficient sustainable production androbotics all seen as strong jobs in big databy 2020New technology is likewise transforming the engineeringskills needs of construction and rail and road infrastructure.A critical part of Network Rail’s railway upgrade plan, thelargest modernisation programme since the Victorian era,involves moving from signalling based on fixed blocks of trackto block signalling sited within moving trains to increase thecapacity of the network. The programme includes High Speed2 and Crossrail, as well as electrification and station upgrades.Unsurprisingly, these major projects necessitate a significantnumber of engineers. It is anticipated that an additional 7,200engineering and technical workers will be needed in high speedrail by 2020.This accelerating pace of technological, demographic andsocio-economic changes is translating to changing needsin the labour. It is critical that the UK prepare itself for thesechanges. It is our actions today that will determine whether thewave of change brought by the fourth industrial revolution willresult in a substantial displacement of workers or in theemergence of new opportunities.7,200 engineeringand technical workersneeded in high speed railby 2020However, while nominal wages are rising, real wages appearto be stagnant. Economists have speculated that this wagestagnation is both a consequence of the UK’s low labourproductivity and the inflation it has experienced since thecountry’s decision to leave the EU.Within this context, the UK’s decision to leave the EU bringssignificant uncertainty to the sector. While the economyhas not suffered as much as the Treasury predicted it wouldfollowing the UK’s decision to leave the EU, there are signs thatthis resilience is declining because of the falling pound andrising prices. There is also evidence to suggest the EUreferendum result has reduced net migration numbers.Employment trendsOur analysis shows robust demand for labour, and anoutstripping of supply in many engineering industries.April to June 2017 saw the highest vacancy ratio in the labourforce since 2001, at 2.6 job vacancies for every 100 filled jobs.Yet this ratio was even higher in some engineering-relatedindustries, including information and communication (3.3)and electricity, gas, steam and air conditioning supply (3.2).Large year-on-year percentage increases in the vacancy ratiowere also observed in engineering industries such as miningand quarrying (up 66.7%) and construction (up 27.0%).It is apparent that the scarcity of candidates, togetherwith rising demand, has had a positive knock-on effecton engineers’ salaries. Our analysis found that the mediansalaries of full time employees working in engineeringoccupations in 2016 – ranging between 32,987 forenvironment professionals and 47,394 for electronicengineers – compared very favourably to the overallaverage of 28,195.61%of businesseswere notconfident there will be enoughpeople with the skills to fill theirhigh-skilled job vacancies4

SynopsisSynopsis124,00079,000engineers and technicianswith core engineeringskills required per yearThe hourglass economyThe increasing fusion between the digital, physical, andbiological, has driven – and will continue to drive – alreadystrong demand for highly skilled labour, especially in the areaof STEM. Net requirement projections from Working Futures2014-2024 indicate that by 2024, 54.1% of the workforce willrequire Level 4 qualifications. This compares with 41.1%in 2014.Going forward, it is also expected that demand for lowerskilled jobs will increase. This is because while the semiroutine nature of many middle-skilled occupations arevulnerable to automation, traditionally low-skilled occupationsoften involve skills not readily automated. Such roles includethose in health and social care, which are forecasted toincrease alongside the needs of an ageing population.This ‘hourglass economy’ is expected to hold for the UKwell into the future.203,000 peopleengineering-relatedroles to arise per yearDemand forecastsAcross the UK and other developed nations, there is anincreasing move towards an ‘hourglass’ economy, withrising demand for both high and low skilled labour. It is clearfrom our analysis that the engineering sector is no exceptionto this trend. Moreover, there is considerable demand forengineering skills outside of industries traditionally deemedto be engineering. Given the engineering talent currentlycoming out of the educational pipeline, we estimate thereis an acute shortfall of engineering skills – and that thiswill continue without concerted action.Altogether,Continued demand for high skill rolese.g. managers and professionals(but supply growing faster than demand)Growth in higher middle skilljobs (professional andtechnical) e.g. designer,technicianTechnologyDecline in traditionalmiddle jobs e.g.clerical, blue collarGlobalisationContinued demand for low skill rolese.g. care, hospitalityLow pay, no paywith Level 3 engineeringskills will be needed everyyear to meet demandthrough to 202459,000 engineeringgraduates and techniciansto fill core engineering rolesDemand forecasts for engineering skillsLabour force movementA bespoke extension of Working Futures undertaken byWarwick Institute for Employment Studies on EngineeringUK’sbehalf estimates that between 2014 and 2024, 1,240,000graduate and technician core engineering jobs will ariseacross all industries as a result of both replacementdemand (i.e. the result of people leaving the labour force)and expansion demand (i.e. new jobs). Assuming that thisis uniformly distributed across the ten years, this translatesto a need to fill 124,000 Level 3 core engineering rolesevery year.It is accepted that the fulfilment of net recuitmentrequirements (whether from replacement or expansiondemand) does not have to be met entirely from new entrantsto the workforce from education. For example, someeconomically inactive people may transition back to thelabour market. There is also movement within the labourforce to and from engineering enterprises and occupations.Alongside this, we anticipate an additional annual requirementfor 79,000 “related” roles requiring a mixed application ofengineering knowledge and skill alongside other skill sets.Altogether, this means 203,000 people with Level 3 engineering skills are required per year to meet expecteddemand.Of this total annual net requirement, 57.7% is expected to arisein the engineering sector. That 42.3% of the projectedrequirement for Level 3 engineering occupations is expectedto arise outside of the engineering sector attests to theubiquity of engineering skills required across industry.Estimated shortfallIt is evident from our analysis that there is a critical shortfallin engineering skills across qualification levels and core andrelated engineering occupations.Given the supply of engineering talent coming from theeducational pipeline through apprenticeships and highereducation, we estimate there to be a shortfall of between37,000 to 59,000 in meeting an annual demand for 124,000core engineering roles requiring Level 3 skills. Within this,we expect a graduate-level shortfall of at least 22,000 per year.Altogether – when looking at total demand for Level 3 engineering skills across core and related engineering rolesmore broadly – we estimate the annual shortfall to be at least83,000, and up to 110,000.5Annual shortfall of up toHowever, analysis into the extent to which there isoccupational mobility to and from the engineering sector,undertaken by the Institute for Employment Studies onEngineeringUK’s behalf, has concluded that these do notmaterially impact the engineering skills shortfall.Using Labour Force Survey (LFS) data for the period 2006to 2016, IES concluded that annual flows into and out of theengineering sector over the last decade were broadly netneutral. This has two implications. Firstly, our engineeringskills shortfall estimates are robust against the omission ofnet intersectoral mobility. Secondly, while there is potentialto reduce the shortfall by attracting more workers from othersectors and improving retention, so far annual net inflowsinto the engineering sector have been too small to make atangible difference.Changes and comparabilityBoth demand and shortfall figures presented in this report arenot directly comparable to previous editions. This is due to theuse of a revised engineering footprint, which has resulted in anarrowing of what is considered to be engineering, alongsiderefinement in the demand and supply methodology, suchas the inclusion of forecasted demand arising in the nonengineering sector. These changes aim to foster greaterconsistency in the sector going forward, and take intoaccount the considerable need for engineering skillsoutside of industries traditionally deemed to be engineering.6

SynopsisSynopsisCareers strategypublished inDecember 2017Government strategiesand policy initiativesPopulation projections from the Office of National Statisticsindicate that in the next 5 years, there will be considerableincreases in the number of 12 to 16 year olds. Over the next20 years, all age groups are expected to grow, especiallythose of secondary school age. This is encouraging forthe potential engineering talent pool.The extent to which this potential is harnessed will bedependent on the educational decisions young people makenow and into the future. The government has introduced anumber of strategies and policy initiatives, many of whichare intended to address skills shortage and employabilityconcerns. These are steps in the right direction, but it isessential that progress toward these stated objectives iscarefully monitored over time.Government strategiesin England phased induring summer 2017Devolved administrationsIn parallel to this, STEM education was the focus of a numberof flagship initiatives across the devolved nations in 2017.Scotland saw the launch of a five year STEM Education andTraining Strategy in October 2017. One of its key areas ofintervention is the recruitment and retention of STEM teachersin schools, which has been a significant issue in recent years.Likewise, last summer the Welsh government announceda 3.2 million drive to improve how maths is taught inWelsh schools.GCSE and A-level assessmentSummer 2017 saw the first GCSE maths and

engineering professionals ‘minor’ group of civil, mechanical, electrical, electronics, design and development and production and process engineers. The ‘core’ definition also includes those who require consistent use of engineering competences – for example, a draughtsperson or a welder. Meanwhile, related engineering jobs were defined as those that require a mixed application of .

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