ACE and EngTechNow – The Retention Gap – What is it and how to tackle it

The Retention Gap, reveals in detail  the cost  to the engineering  sector of losing senior staff and the impact to business effectiveness. This report shows that the UK engineering sector stands to lose up to £9.5 billion over the next ten years due to its failure to retain staff.

ACE has campaigned continually for stable and reliable investment decisions in the area of staff retention recognising that they can help businesses to reduce costs by committing to a continual professional development plan. This report shows the true costs that businesses face through staff turnover and why it is imperative that companies invest in the development of their existing staff.

It is important that businesses are able to simultaneously retain and acquire the talent they need for their future prosperity while protecting their productivity in the present.

To inform and calculate the retention gap this latest piece of research uses extensive data from almost a decade of ACE’s benchmarking service which measures over 500 metrics of a company’s performance.

The research reveals the cost to a company of losing a Salaried Partner/Other Director or Department Head is £13,491 whereas, an engineer cost is £5,128.

Whilst these figures do not seem significant when looking at an individual member of staff, if you then factor in that the industry has an annual average staff turnover of approximately 20% of its total workforce, these costs soon become significant.

With 1.86 million posts due to be filled in the next ten years these costs amount to a staggering £5.2 billion to £9.5 billion depending on the roles being filled and how they are filled throughout the decade.

Industry, however, does not only need to focus on the costs associated with losses at the highest level of their organisation.   With an impending skills shortage, companies need to focus more on how they retain and develop staff as they enter and progress within the company.

Looking more specifically at the future skills being developed to satisfy the new requirements from within the industry, the cost associated with losing a senior technician is £4,908. For junior and graduate engineers, however, the equivalent figure is £2,912 and for entry-level technicians it is £2,820.

Apprenticeships and fair and open access to opportunities are high on the Government’s agenda and this report successfully addresses both issues.  ACE’s Technician Apprenticeship Consortium has successfully shown what can be achieved through effective collaboration between companies, the professional institutions and the training sector.

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ACE – Procurement landscape – Wider, challenging, and in need of reform

It is estimated that the UK Government procures £230bn of products and services per year, with items varying from simple purchases like stationary through to complex investment decisions such as construction.

The construction sector has long voiced its opinion about how efficiencies could be gained through procurement reform. Despite much research and many attempts, progress is still slow and inefficiency remains high.

This report is the first in ACE’s procurement series and takes a critical look at the investment process and procurement landscape in a more holistic way than previous reports/investigations. This landscape is then critically reviewed in light of company, client and individual behaviours and economic theory to try and establish where the issues relating to slow progress actually occur.

The procurement landscape as outlined covers not only the transactional process of buying but also the investment process from its inception through the client process, supply chain engagement and eventually to operation.

This first report aims to transform the language around the procurement debate to one of identifying areas for change. As such, this report suggests the next steps that should be taken into specific areas to ensure future progress is made.

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ACE – Funding roads – Reducing inefficiency and securing investment in roads for future generations

This report takes a macroeconomic approach to explore the potential inefficiency and loss of economic productivity as a result of the current condition of the road network.

This report considers a number of inefficiencies as part of this loss, with a total annual inefficiency of £12.2bn across England’s entire road network.

One of the concerns emphasised in this report is that this annual inefficiency adds up quickly over time, and given recent Government estimates that the number of hours each household will spend in traffic by 2040 will rise to 70 hours, with inefficiency on a path to reaching £27bn annually.

The government should be aiming to reduce inefficiency in the network, not mitigate a rise. As such this paper suggests two models which move the government and policy making towards stable investment mechanisms to ensure that the road network receives the maintenance and investment it requires.

These models are underpinned by the principle of a long term asset management approach to both the local and strategic network and they consider the risks that the private and public sector are able to bear under each scenario.

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ACE – Revolutionising housing – Restoring the value of land: a new model for housing development

This paper is the second in ACE’s housing paper series and explores in detail the challenging conditions within the UK housing market.

Following the discovery of a £185bn housing gap and the disconnect between supply and demand in the housing market. This paper suggests an innovative model that attempts to address these challenges within the housing sector.

It proposes a Land Optimised Value Extraction (LOVE) model which is based around certainty and optimising the value which can be extracted from land by using principles such as a clear strategic direction, regulatory certainty and encouraging market competition.

This model therefore attempts to shift the emphasis and process of planning and development. This aims to reduce the burden throughout the system, reducing costs for parties involved, whilst also balancing the need for strategic housing development, commercial competition and local engagement.

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ACE – The housing gap – The growing human cost of not building enough homes

This paper is the first in ACE’s housing paper series and explores in detail the conditions within the UK housing market.

It finds that there is a serious housing gap (where the number of households formed outstrips houses built) looming in the UK. The paper argues that unless the growing disconnect between supply and demand is tackled through major house building, the housing gap may prove potentially irrevocable. Such a failure to tackle this housing gap would have serious social and economic consequences for the UK.

The analysis in this report reveals that by 2021 the UK will have developed a housing gap of £185bn, the equivalent to 886,000 households, requiring housing to be built on the scale of a city twice the size of Birmingham. This additional gap on top of the already tight conditions in the housing market will if unchanged lead to a future where millions of people in the UK will be unable to afford to own a home.

This analysis highlights an urgent need for the housing gap to receive greater priority from government and all political parties, as well as the need for a new housing model to allow such increased house building to occur.

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ACE – State Investment Bank

This paper is the final paper in ACE’s infrastructure investment series and explores in more detail the rational and practicalities of establishing a State Investment Bank.

Key areas explored in the paper:

  • A State Investment Bank could play an important role in long term economic policy
  • A State Investment Bank would help to stimulate housing supply
  • Given the importance of SME finance, it should remain separated from the task of investing in infrastructure.
  • State aid approval is required for a State Investment Bank
  • A State Investment Bank is not a one stop shop to fix for endemic investment problems
  • A State Investment Bank needs to make profit and invest returns.
  • Building a skills base for a State Investment Bank is vital
  • The change in financial regulatory landscape needs to be factored into a State Investment Banks design
  • The scale of capitalisation for a State Investment Bank is important
  • The banking levy could provide a significant degree of the capital for a State Investment Bank
  • A State Investment Bank requires a solid plan as to its capitalisation proces
  • Could the government scale down Royal Bank of Scotland (RBS) into a State Invsestment Bank?
  • A clear roadmap would be needed to scale up the GIB to a full State Investment Bank.

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ACE – Green Investment Bank

This paper is the fifth in ACE’s infrastructure investment series and explores in more detail the current market conditions, challenges and rationale behind the Green Investment Bank. It concludes that whilst the Green Investment Bank is a step in the right direction, there are some issues which if left unchecked, could undermine confidence in its ability to facilitate green investment.

Key findings

  • The Green Investment Bank is a step in the right direction, but finance conditions continue to raise concerns about scale and speed of implementation
  • The GIB needs to improve transparency and information sharing for investment to take place
  • Perceptions surrounding the GIB and the subsidisation of green projects needs to evolve if investor confidence is to be gained
  • The current plan for granting the Green Investment Bank’s borrowing powers should be reinforced further
  • The GIB should continue to expand and identify other areas where it could facilitate investment

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ACE – Pensions and infrastructure

This paper is the fourth in ACE’s infrastructure investment series and explores in more detail the current conditions within the market, and the implications they have on pension funds’ investment potential into infrastructure.

Key findings include:

  • The scale of the global pensions fund market holds great potential for investment
  • Government role is important given the challenge ahead
  • There is mutual benefit in pension fund investment into infrastructure
  • Infrastructure could help to improve pension funds’ funding status
  • The UK’s pension fund market is fragmented and so restricts the scale of investment required by infrastructure; opening this up could generate £6bn of investment
  • Culture and regulations within the UK need to change if significant investment is to take place
  • Tailoring products and investment to pension funds needs is essential
  • Expectations of returns and risk need to be realised by all parties
  • Pension funds are not the answer to all the UK’s investment requirements

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ACE – Procurement in PPFM

This paper is the third in ACE’s infrastructure investment series and explores in more detail improvement that could be made to the procurement within Public and Private Finance Models (PPFM).

Issues explored in this paper include the concept of flexibility, transparency and the use of a centralised resource to improve procurement efficiency and reactiveness, resulting in better overall value for money for the taxpayer.

The paper explores and has recommendations in the following areas:

  • There needs to be clear guidance on model suitability
  • Centralised efficiency and skills retention are important
  • The two broad procurement phases, provide limited information or confidence to the market
  • Implementing a Procurement Efficiency Mechanism (PEM)
  • There needs to be improved accountability
  • Procurement issues expand beyond that of Public Private Finance Models
  • Design and exploratory work can save time and money
  • Flexibility is required for government to gain better efficiency and value for money
  • Provide a baseline, creating a fixed operational performance will provide certainty
  • Dynamic operational performance, providing capacity and efficiency beyond the baseline

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ACE – Public Private Finance Model: moving forward

This paper is the second in ACE’s infrastructure investment series and explores in more detail the rationale, performance and market conditions that surround Public and Private Finance Models (PPFM).

This paper explores a number of flexible models that should help to improve public and private sector performance. Whilst, encouraging the level of private finance required to improve the UK’s aging infrastructure. Importantly, improving the models through which private finance is encouraged into infrastructure investment is key to providing savings for the taxpayer.

  • The PFI model is in need of review by government following the financial crisis. A number of factors have changed, such as the higher cost and lower availability of capital. This has in turn called into question value for money, the relative cost of the public sector undertaking the project and attracting further investment into primary (greenfield/new build) projects.
  • However, the National Audit Office (NAO)3 has previously found that there are some positives that can be taken forward from the PFI miodel. For example:“Sixty nine per cent of PFI projects reported delivering to the contracted timetable in 2008.”“Ninety four per cent of projects responding to our 2008 survey were reported to have been delivered on, or less than five per cent over, price”
  • There needs to be greater flexibility built within models to allow a more efficient application to a wider set of scenarios. The PFI model has shown that there is an interest from the private sector. Areas such as construction risk can be improved, the financial crisis and the subsequent shift in attitudes away from higher risk projects have highlighted the need for the model to be improved.
  • This paper outlines five Public Private Finance Models (PPFM) that aim to improve the prospects of private financing, its performance and value for money going forward.

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