SCOTTISH engineering companies have seen order intake fall in the latest three months, following eight consecutive quarters of growth, with incoming export business declining sharply, a key survey shows.

And the negative impact of losing workers from other

European Union countries is already being felt by companies in the sector, Scottish Engineering chief executive Paul Sheerin warns in the industry body’s latest quarterly report on activity.

The survey, published today, also shows a fall in staffing at

Scottish engineering companies in the latest quarter, and signals that growth of output volumes in the sector remains only marginal.

In the report, Mr Sheerin says: “There is no doubt that the first negative signs of Brexit have been felt by companies losing EU nationals from their workforce as they avoid uncertainty or the effects of weak sterling and return home. Just to cap this picture, those employees moving from company to company on average can expect to receive three times the salary increase of those staying with their current employer.”

Flagging the impact on companies of the tight conditions in the labour market, with unemployment in Scotland having fallen to 3.8 per cent on the International Labour Organisation measure, Mr Sheerin adds: “All these factors have placed a squeeze on companies having the labour resource they need, and companies report that difficulties to recruit are not just in skilled roles but extend to operator roles too.”

Mr Sheerin laments protracted uncertainty over Brexit.

He says: “As we write, it’s the time of year when wish lists are being written, and decisions are to be made on good behaviour or otherwise. With the political shenanigans currently never-ending, I fear there will be a lot of coal in the stockings of our elected representatives this December. Those like me who expected clarity on our future relationship with Europe long before now can surely now with confidence say: definitely next year.”

The decline in staffing in the Scottish engineering sector in the latest quarter is the first fall for around two years. The drop in export order intake comes after seven consecutive quarters of increase.

Growth in overall order intake for the sector had slowed sharply to a crawl in the previous quarterly survey. In the latest survey, subtracting the proportion reporting an increase from that experiencing a decline, a balance of 8% of Scottish engineering companies posted a fall in order intake. A net 2% of engineering firms reported a rise in order intake in the previous quarter.

A balance of 2% of survey respondents reported a rise in output volumes in the latest quarter. In the previous quarter, a net 3% saw an increase in output volumes. The survey shows a net 2% of engineering companies cut staff in the latest quarter. In the previous quarter, a balance of 17% had increased employment.

A balance of 10% of companies in the sector reported a fall in export order intake in the latest three months. This is in stark contrast to the previous quarter, during which a net 7% of Scottish engineering companies saw a rise in export order intake.

In spite of the reverses in key activity indicators, the survey shows a rise in optimism among Scottish engineering companies.

Mr Sheerin warns that “skills snobbery”, around foundation apprenticeships (FAs), constitutes a “wasted opportunity”.

He says: “To put it bluntly, as a society we seem to hold a view that looks down on FAs as the lowest rung of the ladder and are missing an opportunity as a result. FAs give us the ability to engage early and steer young people into engineering, and crucially allow us to capture the attention of young people where school for whatever reason doesn’t click for them but the world of work does.

“Many of us are, or know colleagues who became, excellent engineers, with less-than-stellar school exam results. Right now, modern apprentice and graduate routes leave those future talents behind and that’s a dreadful waste that we can’t afford. If that doesn’t convince you, look outward to Germany, a manufacturing and engineering example of best practice, where in 2015 the calculated share of population starting an apprenticeship was 52%, compared to less than 10% of school-leavers in Scotland for the same period.”