By Ian McConnell

Business Editor

SCOTLAND’S engineering sector achieved an upturn in orders, exports, output and staffing in the latest quarter, following a protracted period of decline amid the pandemic, but recovery is patchy and raw material prices and shortages are causing difficulties.

The overall improvement in trading and return to employment growth are revealed today in the latest survey of activity in the sector from industry body Scottish Engineering, which flagged the Covid-19 pandemic and Brexit as factors in the raw material problems.

Scottish Engineering chief executive Paul Sheerin said the latest survey results bring “some welcome and justifiable optimism for the first time in 12 months, albeit with some notes of caution too”.

He flagged continuing difficulties for the likes of precision machining companies serving the civil aerospace, and oil and gas sectors.

The civil aerospace sector has been laid low by the massive impact of the pandemic on international travel, and consequently on airlines. And the oil and gas sector was hit hard with a tumble in crude prices last year as the pandemic took hold.

Mr Sheerin said: “It would have been naïve to think that we could enjoy a straightforward across-the-board upturn, and we should take a minute to note the relative speed at which an upbeat outlook has arrived, as this timeline looks distinctly different from the recessionary impacts of recent years. That difference is a key driver of caution, as we all will want to see this trajectory sustained and extended to all before we start any celebrations.”

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He added: “Let’s start with areas where further improvement is needed, and our first thoughts stay with precision machining companies where the continued lack of activity in civil aerospace and oil and gas [explains] their low order response while others have moved to positive. A forward view shows a forecast improvement in domestic and export orders, reflected in a mild pick-up in optimism, but these remain tough times for those companies, and the return to aviation traffic approaching pre-pandemic levels remains some time away.”

Subtracting the proportion reporting a fall from that posting a rise, a balance of 27 per cent of engineering companies in Scotland saw an increase in order intake in the latest quarter. In the preceding three months, a net 9% had experienced a fall.

And a balance of 31% recorded a rise in output volumes in the latest quarter. Output volumes had been flat in the preceding three months, following three straight quarters of decline.

A net 14% of engineering companies in Scotland posted a rise in export orders in the latest three months, following seven straight quarters of decline.

And a balance of 18% reported a rise in staffing during the latest three months, following four consecutive quarters of falls in employment.

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Highlighting problems for Scottish engineering companies regarding the availability and cost of raw materials, Mr Sheerin said: “Another tricky topic that has impacted almost everyone is increasing pricing – and availability – of raw materials. Everything from metals to plastics, cardboard to hydraulic oils [seems] to have been on an upward spiral and [in] short supply.”

He added: “In some cases, it’s been difficult to separate the Covid and Brexit impacts affecting these goods, but there is no lack of clarity on the concern it brings and the subsequent movement on pricing which has had to be passed along. Short supply places additional pressure on meeting promised delivery timing for customers who need to be retained, and so this is an area we will all be watching carefully for improvement.”

Highlighting the positives, he flagged the rise in exports.

And he said it was “good to see our fabrication companies’ substantial increases in forecast orders mirroring the overall increase across construction”, noting that staffing numbers were forecast “to rise between 13% and 50% for all”.

Mr Sheerin welcomed a rise in investment in training in the latest quarter, in the context of “fragile skills supply” in the sector. This rise was driven by small and medium-sized companies.

He highlighted the importance of this in the context of the loss of skills with the departure from the workforce during the last year of older employees. And he highlighted a tumble in the number of apprentices starting work in the sector, amid the pandemic.

He said: “We know that a significant proportion of the redundancies of the last year were retirements and therefore likely permanent loss of skills, and these are combined with a 50% drop in new apprentice starts in the same period, so picking up the pace on training is welcome and essential.”