Nick Ellins, chief executive, Energy & Utility Skills Group

“Potentially the apprenticeship levy is a really positive game changer. But it’s about how you apply it.”

Nick Ellins is not having an easy ride in his first few weeks as chief executive of Energy & Utility Skills (EU Skills). He rejoined the utilities sector in November just after the government announced funding cuts that place a question mark over how his new organisation will continue to deliver core services and value.

The cuts in question came from the Department for Business Innovation and Skills (BIS) as it prepared for the impact of the strategic spending review – the results of which were announced on 25 November, shortly after our interview. Among other things, these cuts will withdraw the vast majority of government support for industrial partnerships, eight sector-specific skills groups launched as part of the government’s policy to put employers at the heart of skills and training development.

The Energy and Efficiency Industrial Partnership (EEIP) has 70 members comprising energy companies, utilities and suppliers. Since its launch in 2014 the EEIP has helped 1,400 young people begin careers in the energy sector through apprenticeships. Four hundred of those apprentices have enrolled on freshly launched “trailblazer” training programmes – tailor-made by employers, for employers via the industrial partnership.

This work – and other products and services provided by the EEIP such as talent banks, development schemes for NEETs (those not in education, employment or training) and workforce planning tools – are important to a sector that faces major infrastructure transformation along with skills shortfalls, and where skills goalposts are constantly moving thanks to rapidly evolving technology and business models. It is estimated that  engineering employers as a whole in the UK need 1.8 mjillion new technical staff by 2022 to replace retiring talent and deliver business plans. That means drawing in 182,000 new recruits each year. Currently the run is nearer 100,000.

So it’s not a pretty picture, but Ellins is optimistic about the outlook for continuing the good work of the EEIP, in spite of the sudden withdrawal of about a third of its funding. He accepts the change as “a reality of the business situation” and in the week after our interview he is set to “do the rounds” with utility chief executives, explaining the new situation and pitching the business case for them to make up the funding shortfall.

Early indications of executive willingness to do this is “heartening” says the infectiously enthusiastic Ellins – though he has no illusions about what a big ask it will be. “They are business people and, especially if you are working on an RPI-X model, every year they’ve got to take cost out. This will just be one more pressure.”

Utility Week meets the new EU Skills boss, unusually, at its own offices, which Ellins endearingly refers to as the Utility Week “Death Star” – an epithet which misleadingly flatters our scale. In truth it’s more akin to a base for the Rebel Alliance.

Before getting stuck into the vagaries of skills policy and funding changes, he talks earnestly, but without worthiness, about his passion for talent development, for nurturing the potential of young people and delivering training for older workers to help extend and improve the quality of their careers.

He says it’s a passion that springs from his years working in industry where he learned “the value of having good people around you”. His new role will allow him to focus on ensuring that more utility companies can enjoy this luxury, and the associated benefits it brings in performance, a prospect he says makes him eager to get out of bed in the mornings.

Ellins joins EU Skills from the rail sector where he was policy director for the Rail Delivery Group and the Association of Train Operating Companies (see “Off the Rails” box below). Before this dip into rail, however, Ellins had already racked up 25 years’ experience in the utilities sector – specifically water. He has twice been president of the Institute of Water, where he was responsible for launching the Rising Stars programme to celebrate high-achieving young employees. He was also deputy chief executive at the Consumer Council for Water between January 2008 and march 2011.

Off the Rails

Chatting with Nick Ellins about the strange coincidence which sees him cross to EU Skills from the rail sector just as its former CEO Neil Robertson goes to take up post as chief executive of the National Skills Academy for Rail Engineering quickly reveals wider merry-go-round of executive talent between rail and utilities, especially water. Ellins points out that several top jobs in the water sector are now held by executives who have done stints in rail including; Cathryn Ross, chief executive of Ofwat who went to the Office for Rail Regulation for just over two years before returning to the water regulator to make her mark on PR14, Jonson Cox, chairman of Ofwat who worked at Railtrack for 11 months and Michael Roberts, the new chief executive of Water UK who moved to the water sector from his job as chief executive the Association of Train Operating Companies.

Ellins observes that the pattern makes sense given a number of similar challenges being faced by both rail and water in maintaining and replacing aging infrastructure in ever more cost effective ways as well as evolving away from public sector backgrounds to create commercially sound, service-based markets.

As such, Ellins has a deep understanding of the particular skills and management needs of regulated utilities and is acutely aware that, with the introduction of totex and outcome-based incentives for customer focus across both the water and energy networks sectors, new pressures will rise around the availability of “soft” skills. In particular, as competition increases in the networks sector and the non-domestic water market opens up, service skills will become highly sought after “because there’s a big difference between billing someone and encouraging them to switch to your company. It’s a totally different skill. To do that credibly, and with trust, first time every time takes an awful lot of training.”

Ellins knows that the demand for such talent is well documented and commonly recognised by employers – he’s not trying to teach anyone to suck eggs. Instead he’s keen to act as a partner for industry to ensure its collective appreciation of skills gaps and changing skills needs becomes greater than the sum of its parts. He also wants industry skills issues to be clearly and consistently represented to external audiences in government and the regulators, who have skills problems of their own to consider – “and which we can help them with”, Ellins adds.

Crucially, Ellins says there should be a united front across companies, regulators and suppliers on issues relating to sector attractiveness, which remains a critical factor in the sector’s recruitment problems. Addressing this problem requires more than a conventional charm offensive or advertising campaign, he says. Players in the sector must recognise that for most young people, identifying jobs and vacancies isn’t enough to inspire them to join the sector. “You’ve got to start with the things they connect with,” Ellins asserts. “You’ve got to say, if you want to work for us, you’re into the environment, you’re into society and helping people – doing something really tangible for other people’s lives. That can get lost if you just talk about what jobs like pipe laying involve.”

Many utilities veterans reading this will no doubt feel that these motivators have long been part of the public sector ethos of the sector. Ellins agrees but returns to his point about the changing skills sets and business requirements associated with increasing focus on customer service. The sector has to move from an approach that has seen it applying services “to” people towards an approach that delivers services “for” people, he says.

Attracting people who have the emotional intelligence to understand this difference, as well as the technical aptitude for STEM-based roles will mean focusing on quality not quantity, says Ellins – which in spite of the ominous skills deficit mentioned earlier, is what employers want. In typical glass-half-full manner, Ellins hopes that a future without government input into the EEIP will make it easier for the partnership to fix its attention on this employer priority because there will be less pressure to contribute to the government’s pledge to deliver three million apprenticeship starts (across all sectors) by 2020.

Again, Ellins emphasises that he is hopeful of gaining ongoing financial commitment to the EEIP from company leaders beyond March next year when government involvement falls away. But the change in the partnership’s funding arrangements is not the only development in the skills landscape that the EEIP and its supporters will have to absorb in the coming months.

In the summer Budget, chancellor Osborne announced plans for an apprenticeships levy for large employers to help fund apprenticeships. Osborne said the levy, which will be implemented in 2017/18 “will support all post-16 apprenticeships in England. It will provide funding that each employer can use to meet their individual needs. The funding will be directly controlled by employers via the digital apprenticeships voucher, and firms that are committed to training will be able to get back more than they put in.”

More detail on how this will work in practice was issued with the results of the comprehensive spending review and brought the news that all employers in England Scotland and Wales with employee pay costs of more than £3 million will be subject to an additional 0.5 per cent levy on payroll, which will be automatically deducted via PAYE.

For those with strong convictions about the need to invest in future talent, the intent behind the levy is positive. However, Ellins is aware that there’s concern that the levy may be a burden to employers and have “unintended consequences” – including downward pressure on existing training budgets, and on profit margins for suppliers which inevitably be “passed on” in their businesses. This concern reflects those expressed more broadly, that the apprenticeship levy will impact wages.

Ellins voiced his disquiet about the levy to Utility Week before the spending review announcements confirmed government’s intentions for the levy. He set out his response to that announcement in a recent blog (which can be viewed here), but the sentiment expressed at this earlier stage also still stands. “Potentially it’s a really positive game changer because of what it’s trying to do,” says Ellins. “But it’s about how you apply it and let companies get on with the day job, continue their training and go for apprenticeships – we also need to remember that apprenticeships are only a part of the picture, an important part, but just a part.”

Ellins is worried that despite its good intentions, the levy could end up detracting from current training budgets and make the job of EU Skills and the EEIP more bureaucratic. “The problem [with using PAYE] is that as soon as you start taking that money and putting it through a system outside the companies themselves you’ve got another level of red tape. You now need another business to run it, you need companies to assure it, you need a national audit office – and there you go.” During a consultation period to define the shape of the levy, EU Skills recommended removing the PAYE element. “Our perfect solution is to leave it within the business and to find a mechanism for incentivising companies to use that money for training,” says Ellins.

Finally, amid all this policy turmoil, the EEIP’s widely respected chairman, Steve Holliday, is due to step down as he also exits his role as chief executive of National Grid next summer. Ellins confirms that he’s spoken with Holliday briefly about succession plans but that no announcements are imminent.

“There are questions over how most effectively to chair it [the EEIP],” Ellins explains. Given the uncertainty around the future of the partnership’s funding “there’s really a question over what are you chairing. If it was a government-facing partnership then obviously we’d want someone with expertise in that. If it’s all about regulated utilities, that’s another matter; and if it’s actually more biased towards supply chain and the relationship with utilities, that’s different again”.

In short, all Ellins really has to say about the change of chair is that “Steve Holliday has done an exceptional job. He’s really galvanised people and he’s put his money where his mouth is too… But the pressure for now is to get round people and find out what they want to do.”