THE Scottish engineering sector has suffered its first quarterly decline in output volumes since early 2010, as well as falls in order intake and export business, according to an industry survey.

A sharp slowdown in growth of the sector's workforce is also signalled by the survey, published today by industry body Scottish Engineering,

However, new Scottish Engineering chief executive Bryan Buchan highlighted the expectation of the engineering sector north of the Border that growth in order intake and output volumes would resume in the coming three months.

He meanwhile cited widespread reports of skills shortages from Scottish engineering companies, and called for action by the Scottish and UK Governments to address this issue.

Mr Buchan also highlighted Scottish engineering firms' desire for Chancellor George Osborne to continue cutting UK corporation tax in his Budget on March 20.

Of about 170 Scottish engineering companies which responded to the latest quarterly survey, 33% reported a fall in output volume, 30% experienced a rise, and the remainder reported a flat position.

The balance of 3% posting a fall in output volume contrasted with the previous quarterly survey, in which a net 11% reported a rise. And it signalled the first drop in overall output volume in the Scottish engineering sector since the opening quarter of 2010.

Large companies, overall, suffered particularly steep falls in output in the latest quarter. Small firms also reported drops, with medium-sized companies reporting a flat position.

Meanwhile, 39% of Scottish engineering companies reported a fall in order intake in the latest quarter, with 29% experiencing a rise, and the remainder seeing an unchanged position.

The net 10% reporting a fall in order intake contrasted with a balance of 11% reporting a rise in the previous quarterly survey.

Fabricators and metal manufacturers suffered particularly sharp falls in order intake in the latest quarter, according to the Scottish Engineering survey. Overall, small and medium-sized engineering firms reported a fall in orders, with large companies experiencing a flat position.

Meanwhile, 39% of Scottish engineering companies reported a fall in export orders in the latest quarter and only 28% enjoyed a rise. The balance of 11% reporting a drop contrasted with the position in the previous quarterly survey, in which equal percentages of engineers north of the Border had reported rises and falls in export orders.

Staffing in the Scottish engineering sector continued to rise in the latest quarter, with 27% of firms reporting an increase and 22% experiencing a fall. However, the net 5% reporting a rise in staffing was the weakest such balance since the second quarter of 2010, and well adrift of a corresponding figure of 22% for the third quarter of 2012.

Scottish Engineering's survey has in recent years stood out as an upbeat indicator, contrasting with a raft of gloomy economic data and surveys.

Looking ahead, 38% of Scottish engineering companies projected a rise in output volumes in the coming three months, and only 21% anticipated a fall, with the remainder projecting a flat position. However, while small and medium-sized firms overall projected a rise in output volume in the next three months, large companies as a whole expected a fall.

Meanwhile, 30% of Scottish engineering firms anticipated a rise in order intake, while 19% projected a fall. Overall, the small, medium and large company categories all projected a rise in order intake in the coming three months.

Asked if he was disappointed with the latest quarterly survey, Mr Buchan replied: "I am disappointed from a personal point of view. I would have hoped for a better first quarterly review to come out under my tenure."

However, highlighting Scottish Engineering members' positive outlook, he added: "We look at the three months past, and the three months forward. The views are pretty positive on (an) anticipated upturn in orders."

Mr Buchan described the survey as a "mixed bag". He said that Scottish engineering companies serving the oil and gas sector, although they were still "doing very well", had in general reported a downturn for the last three months.