Engineering firms suffer fall in orders

Group Business Editor

Friday 31 August 2012

SCOTTISH engineering companies suffered an overall fall in orders in the latest three months, while output growth slowed to a crawl after nine straight quarters of solid expansion, an industry survey reveals today.

GLOOMY OUTLOOK: A survey has shown a fall in demand for Scottish engineering companies from within the UK.

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IAN McCONNELL BUSINESS EDITOR

Eurozone economic troubles were cited by Peter Hughes, chief executive of industry body and survey publisher Scottish Engineering, as a key factor in the fall in orders. The survey showed a significant drop in exports.

Mr Hughes noted the eurozone accounted for about half of all overseas sales by Scotland's manufacturing engineering sector.But the survey also points to a fall in demand for Scottish engineering companies from within the UK. It shows a fall in UK order intake for Scottish engineers across each of the small, medium and large firm categories. A fall in exports was reported for each of these categories.The UK economy has tumbled into double-dip recession. The British Chambers of Commerce yesterday forecast UK economic output would fall by 0.4% in 2012.Subtracting the 31% of Scottish engineering companies enjoying a rise in order intake from the 34% experiencing a drop, a net 3% posted a fall in the latest three months. This contrasted with a net 12% reporting a rise in order intake in the prior three-month period.And only a net 1% of firms reported a rise in output volumes in the latest three months, with 34% posting a rise, 33% encountering a drop, and 33% experiencing an unchanged position. This balance was down sharply from a net 16% reporting a rise in output in the prior three-month period.A net 14% of Scottish engineering firms reported a fall in exports in the latest three months, a significant deterioration from the balance of 1% posting such a drop in the previous quarterly survey.Meanwhile, a net 5% of Scottish engineering companies reported a fall in optimism. But a net 22% said staffing had risen in the latest three months, pointing to a pick-up in the pace of recruitment.Within the Scottish engineering industry, electronics manufacturers, oil and gas sector-focused firms, and machine shops bucked the downward trend by achieving overall rises in orders in the latest three months. However, fabricators and mechanical equipment manufacturers suffered overall falls in orders during this period.Mr Hughes highlighted recent strong performances from big companies within Scottish Engineering's membership, including Wood Group, Weir Group, Babcock, and BAE Systems. He also highlighted the buoyancy of the engineering sector in Aberdeen, which continues to benefit from the strength of the oil and gas sector. Mr Hughes said: "Aberdeen is living in a bubble at the moment, going absolutely crazy. There is a severe skills shortage there."He noted the wider engineering workforce in Scotland, as in the UK as a whole, was ageing and flagged plans by firms in "virtually all sectors" to raise investment in training to address the need to replace older workers in the short and medium term. He put the average age of the Scottish engineering workforce at 50-plus.Mr Hughes also cited a shortages of graduates to take up design and project engineering roles. And he said a shortage of computer numerically controlled (CNC) machine operators had forced one company to turn away £1 million of business. CNC machines are used to make components.Commenting on the lending climate for engineering firms, he said: "The banks tell me they are offering more money. I will believe it when I see it."Mr Hughes meanwhile said the Scottish Government should alter its energy policy and consider a new-build nuclear power station.

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Engineering firms suffer fall in orders

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