Bob Cleland, chief executive of venerable Scottish engineering company Howden, told The Herald he is preparing the group for a major uplift in 2011 but warned that smaller Scottish engineering companies must look to world markets to prosper in the global economic recovery.

He also said he was optimistic he can boost the group’s headcount this year after making a number of redundancies during the downturn.

Cleland, who last week hosted Princess Anne at the company’s compressor-manufacturing plant in Craigton, on the south side of Glasgow, and showed off the group’s recent £4.5m investment in new technology, declined to reveal Howden’s total Scottish investment figure for 2009 and 2010, but said it was “multi-millions” on top of the technology spending.

Howden, which was taken over by London-listed Charter 13 years ago, has retained its global headquarters in Renfrew, from where it controls operations in 18 countries.

The company, which is now the world’s largest and longest-established manufacturers of air and gas handling equipment, makes high-quality compressors in Scotland for use in the energy, refrigeration and power sectors, and employs around 400 of its 4000 staff in Renfrew and Glasgow.

Howden’s headquarters is the site where the original business was founded in 1854 by James Howden, a 22-year-old Scot who made boilers and steam engines for the marine industry.

Cleland said: “Our 2009 order book had around £500m – not as good as the £630m the year before – but it still means that 2010 will be a good year.

“Because of our lead times, those £500m of orders in 2009 will feed through into the 2010 results.

“We were definitely not hit as hard as some sectors, for example retail, during the downturn – in fact, I’d say we weathered it pretty well – and I expect this year to be around the same as last year.

“But I anticipate things will pick up in 2011. While it’s still early in the year, we’re already seeing a significant pick-up in enquiries – not so much in orders yet, but enquiries can lead to orders, and I’m cautiously optimistic.”

Cleland said he expects the rebound to come initially from Asia – but also in the so-called BRIC nations of Brazil, Russia, India and China.

In past global slowdowns, the US has invariably led the way out, followed by Europe and the rest of the world.

However, for the first time, the catalyst is expected to come from China and the rest of Asia, where resurgent economies are helping the still-shaky West recover from the deepest recession since the Second World War.

The economic centre of gravity has been shifting for some time and economists have long predicted that an increasingly powerful China would come to rival and eventually surpass the US in economic influence.

China last month provided fresh evidence that its economic recovery was gaining momentum, as data for November showed industrial output soared 19.2% from a year ago, while imports jumped 26.7%. Cleland said Howden’s slowdown last year reflected the slowdown in China – the company’s largest market – and recovery there will see Howden’s fortunes rise.

Asked about the prospects for Scotland’s hard-pressed engineering sector, Cleland said: “Bigger companies like Weir Group and Jim McColl’s Clyde, I suspect, will do very well over the next few years because of their international focus – that’s what mitigated a lot of the problems for us during the downturn – but smaller Scottish engineering companies that focus solely on the domestic market could well find themselves in trouble.

“I would recommend that they look internationally for their future. The big growth will not come from the UK market.”

Meanwhile, Cleland said Howden was also moving into the aftercare market this year.

He said: ”That will offset the expected reduction in orders in 2009 and 2010, at least compared with our 2008 order book.

“But I’m hoping for real growth from 2011 – again, I’m cautiously optimistic – as the world markets recover from the downturn and as we grow the aftercare side of the business.”

Aftercare, which includes repair, servicing and overhaul operations, can be hugely profitable for many engineering companies, and is a crucial business model component for the likes of Rolls-Royce and Boeing, which sell engines relatively inexpensively in exchange for lucrative long-term maintenance and overhaul contracts.

During the slowdown, Cleland said he had been forced to lay off about 7% of the workforce globally – some 270 employees, 50 of which were at factories in Scotland. However, he added: “We’re extremely hopeful we will be able to add staff between now and 2011, particularly as China and the rest of Asia recovers.

“We’re also looking for growth in Russia and India. Russia is very strong on the petrochemical side, and we’ve recently opened a sales office in Moscow, but China is strong in the power market, and India is getting stronger.

“We’re also looking for acquisitions. This could be a good time to buy companies that aren’t performing as well as they could be.

“We won’t have any problem raising the cash. Our parent, Charter, has no debt and good banking facilities. We’re very much looking forward to the next few years.”

Mark Smith