Orders upturn for Scots engineering

Output volumes showed an eighth consecutive quarterly rise in the latest three months.

And the survey, in conjunction with M&C Energy, revealed an eighth straight quarterly increase in Scottish engineering companies' overall staffing levels.

Peter Hughes, chief executive of Scottish Engineering, was upbeat about the findings.

He said: "It is pleasing to note that, despite the slight blip in the last quarter of 2011, our Scottish manufacturing engineering companies are proving to be more resilient than many people expected."

The fall in order intake reported in the December survey followed six straight quarterly increases. These rises were achieved during a period in which the overall UK economy struggled.

Mr Hughes said: "Overall order intake once again shows a positive situation and output volume maintains its long-running success, now stretching to two years. Overall recruitment remains strong, and indeed many companies continue to report skills shortages."

He told The Herald that the relative attractiveness of the US and Japanese export markets had increased, as a result of these two economies' stronger performance. However, he also noted that "50% or more of our exports go to the eurozone".

Commenting on recent meetings with Scottish Engineering members, Mr Hughes said: "The feedback we are getting is positive optimism, and hoping we don't catch pneumonia if the eurozone catches flu."

The Scottish Engineering survey showed mid-sized companies, with between 100 and 500 employees, were the strongest performers in terms of growth of order intake and output volumes. Large companies enjoyed growing order intake, but suffered falling output volumes. Small companies achieved increased output but reported a fall in order intake.

Among sub-sectors, electronics companies, fabricators, and metal manufacturers enjoyed a rise in order intake. But firms in the mechanical equipment and non-metal products categories suffered a fall in orders.

Mr Hughes called on the Scottish Government to reconsider its policy of having no new-build nuclear power plants in Scotland.

He said: "To talk about 100% of your electricity coming from renewables is just daft."

Mr Hughes declared that Scotland would not receive "top dollar" for excess power which it had to sell when renewable generation was strong. He added that Scotland would, however, be charged "top dollar" when renewable energy generation was low and it had to import electricity to meet demand.

He also highlighted the importance of continuing to attract UK defence spending to Scotland, declaring this industry supported tens of thousands of jobs north of the Border and express- ing concern over the impact of

"negative comments" about the Faslane naval base.

Mr Hughes emphasised his members' wish to see a "much earlier" referendum on Scottish independence than that planned for autumn 2014, declaring: "The one thing business doesn't like is uncertainty."

The Scottish Engineering report follows a survey yesterday from the Chartered Institute of Purchasing and Supply which revealed a sharp slowdown in growth of UK manufacturing activity in February.

CIPS' headline purchasing managers' index for manufacturing, a composite measure of activity which includes output, new orders, employment, suppliers' delivery times and stocks of goods purchased, fell from 52 in January to 51.2 in February on a seasonally-adjusted basis.

Although it remained above the level of 50 which separates expansion from contraction, the February reading was weaker than the figure of 51.8 projected by the City.

There was a sharp slowdown in output growth, and a marginal fall in both total new orders and export orders.

Howard Archer, chief UK economist at consultancy IHS Global Insight, said CIPS' survey was a "reminder that the economy still faces a hard slog to develop sustainable growth" and described the findings as "disappointing".

The pace of increase in staffing picked up, but remained modest.