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8 | 1ST - 7TH SEPTEMBER 2017 | UTILITY WEEK Interview the upcoming AMP. Traditionally, this process has been dominated by finance and policy teams in collaboration with asset leaders who pore over the detail of complicated incentive and penalty mechanisms to calculate a plan that would secure them a tidy spending allowance and protect shareholder interests. "There's no logical reason currently why policy teams would consider some of the issues impacting the work of HR directors – issues which directly impact how utilities will approach recruiting, training and retaining an effective workforce for the delivery of future plans," says Ellins. Pointing to a prime example, Ellins identifies the new apprenticeship levy, which came into effect this April. The new employer tax requires all companies with a payroll of more than £3 million to contribute 0.5 per cent of what they pay out in salaries to a government-owned apprenticeship training fund. Companies can then claim this money back in cred- its to deliver approved training schemes for apprentices. It's a complex mechanism which, though live, is not yet finalised. There are tweaks and details coming down the line, especially regarding how it will be run in Wales, Scotland and Northern Ireland, whose governments have devolved control of skills policy areas. "If you are focused on PR19 within a water company, why would you even stumble on the work that is being done to deliver the apprenticeship levy? Why would you even consider it?" asks Ellins. "It's only when you start to look at the productivity costs for your business that you'd start to consider that the skilled labour is not available and you'll have to put your price up to be able to go and get it" – not a move that would be likely to get a water company a prized position in Ofwat's "exceptional" or "fast tracked" cat- egories for business plans. With resilience in the round giving prominence to skills issues, however, Ellins is clear that "HR leaders absolutely must make sure they are at the table in plan- ning meetings". Ellins' hopes for a water price review with skills and workforce strategy at its core extend equally to energy, and he is working diligently with leaders at Ofgem to carve out a strong position for skills in the RIIO2 methodology. However, it's not only regulators Ellins wants to see embracing skills and workforce challenges. Government, too, could play a stronger role, he insists. First, he finds fault with strategic direction statement from the Depart- ment for Environment, Food and Rural Affairs (Defra), which sets Ofwat's objectives. Published in March this year, the statement failed to reference industry skills or workforce requirements a single time. Ellins is frus- trated: "Why didn't it mention workforce?" he asks. "The sector takes its lead from that statement." But it's not just Defra and the Department for Busi- ness, Energy and Industrial Strategy (BEIS), the utilities sector's primary points of contact with government, that Ellins believes could play a much more positive role in connecting infrastructure and investment ambitions to the availability of labour and talent. He has set his sights on the Treasury. "The Treasury owns the national productivity agenda and the National Infrastructure Plan," says Ellins. "It also ultimately owns the industrial strategy, which it commissioned out to BEIS. So there is a natural reason for the Treasury to take on a kind of stewardship of the sector." Someone should be responsible in the Treasury, Ellins suggests, for providing an "intellectual overview" that looks at expectations for national productivity and industrial growth as well as infrastructure investment and asks "does this all fit" with what is known about labour demographics? With Brexit looming, Ellins is clear that this require- ment is becoming more urgent by the day. Quoting fig- ures from the Office for National Statistics, Ellins warns that the number of EU nationals working in the UK is falling, so too is the number of EU nationals arriving and seeking work. Meanwhile, there has been an increase in the number of EU nationals emigrating from the UK. Set these trends alongside a UK labour market dis- playing its highest ever employment levels, and a utilities sector in which 36 per cent of vacancies are designated "hard to fill" because of skills issues (the cross-sector average is 26 per cent), and it's clear there is a toxic prob- lem brewing for the industry, says Ellins. But he's determined not "to be all doom and gloom". "It's not about bemoaning a 'crisis'. The point is 'what are we going to do about this?'" Earlier this year, Energy & Utility Skills launched the first ever utilities sector strategy for skills and workforce renewal, aiming to leverage it as a tool for rallying col- laborative and strategic action around the challenges it sees ahead. The document succeeded in securing the backing of an impressive group of utility sector chief executives, including Ofwat's Cathryn Ross. Subsequent meetings with Ofgem, BEIS, the Drinking Water Inspectorate, the Treasury and more have buoyed Ellins' spirits. With sustained senior buy-in, Ellins sees every reason to be optimistic that utilities, their regulators and gov- ernment can collaborate to deliver a stronger sector for a low carbon, post-Brexit future. "HR leaders absolutely must make sure they are at the table in planning meetings." The growing skills shortage • UK utilities companies will be responsible for 56 per cent of projects within government's £500 billion National Infrastructure Plan. (This is in addition to infrastructure spending already committed to in regulatory settle- ments.) • Utilities companies need to recruit 221,000 new staff members by 2027 to replace retiring workers and people who leave the sector for jobs elsewhere. Meanwhile, 36 per cent of vacancies in the utilities sector are classed as "hard to fill" because of skills shortage (the national average is 23 per cent). • The number of EU nationals arriving in the UK seeking working has fallen by 180,000 in the year since the Brexit vote. In December 2016, the Office for National Statistics said the number of EU nationals working in the UK had dropped by 200,000 compared with the previous year. Nick Ellins will deliver a keynote presentation at Utility Week's HR Forum on 26 September. Find out more at: utilityweek.co.uk/HR