THE Scottish engineering sector recorded another strong increase in orders in the UK in the latest quarter although the growth rate slowed while a short-lived recovery in exports petered out.

The latest quarterly survey by industry body Scottish Engineering found that more firms reported an increase in orders than suffered a fall in business in the latest three months.

Subtracting the 29% of companies that recorded a fall in orders from the 41% that posted an increase in sales, a positive balance of 12% of firms achieved growth.

While the balance was down on the two-year high of 24% in the preceding quarter, Scottish Engineering said the sector is still seeing healthy order growth. Orders have increased for three quarters running.

But businesses appear to have fared much better in the UK market than in the export trade in the latest period.

A balance of 10% of respondents won increased business in the UK.

Some 31% of respondents recorded a fall in export orders. Only 29% increased orders, resulting in a negative balance of 2%.

While 67% of firms working in the oil and gas sector reported a fall in export orders, none reported an increase.

The export figures may disappoint ministers given hopes that success in overseas markets could help manufacturers play a part in rebalancing the economy.

The negative reading for export orders was the seventh in nine quarters.

Scottish Engineering's chief executive Bryan Buchan said conditions in the eurozone remain tough.

The strength of the pound against the US dollar is posing challenges.

Mr Buchan said firms that supply the oil and gas sector may be facing greater competition from US rivals amid the boom in activity in shale areas.

In the quarterly review, Mr Buchan said: "The energy question is becoming even more of an issue as price rises are passed directly to manufacturers, putting further pressure on competitiveness in domestic and export markets."

Yesterday, he pinned much of the blame for high energy costs on the European Union for holding up a plan to provide relief for firms in energy intensive industries from the costs associated with the carbon floor tax on fossil fuels used to generate electricity in the UK.

Mr Buchan noted prices also reflected the policies of energy companies but said he did not blame them for high energy costs.

A balance of 29% of respondents said they were more optimistic than in the previous quarter. Balances of 22% and 12% expect to increase domestic and export orders respectively.

Balances of 31% and 27% expect to increase capital investment and training budgets respectively.

A balance of 16% of respondents expect to increase employee numbers.

Scottish Engineering found a balance of 12% increased output in the three months to November compared with 19% in the previous period.

Following publication of the Scottish Government's White Paper on Independence on Tuesday, Mr Buchan had said his members' first concern was the plan to quickly remove Trident, with the loss of at least 1600 jobs in Faslane and Coulport and a large number of posts in the supporting supply chain.

Yesterday he said Scottish Engineering wanted more information on how the Scottish Government proposed to "balance the books" if the country became independent.

Regarding the proposed 3% cut in Corporation Tax, Mr Buchan said: "We applaud the notion of taking down the rate of Corporation Tax but for a lot of our members that's irrelevant (because they are not making the required profits)."