In October, our manufacturing community enjoyed the 2023 Scotland Manufacturing and Supply Chain Conference and Exhibition, which returned even bigger and better after its successful launch last year. Its broad, all-sector approach enables it to avoid overlap with more area-specific events and in turn drew three-and-a-half thousand visitors across just a one-day exhibition.

On behalf of Scottish Engineering, I was privileged to open the day with my thoughts on the highs and lows for manufacturing and engineering in Scotland. My reflection was that we sit in an interesting place, having experienced a rapid recovery from the pandemic impact, and a subsequent period of significant pressure on capacity to fulfil demand. Some of that has ebbed and flowed because of wider economic pressures, but aggregate demand remains positive, and once again the width and breadth of sectors served helps maintain an overall healthy outlook.

Scotland’s defence, aerospace and energy sectors, to name just a few, remain strong with a pipeline of demand to be fulfilled. A look ahead in new areas highlights that the clear opportunities from the sheer scale of infrastructure changes that will be needed to decarbonise our lives are huge, and whilst no one is going to hand them to us on a plate, there are undoubtedly chances to be taken across energy transformation, transport and heat.

Highlighting the headline winners is understandable, but Scotland’s manufacturing resilience also comes from a spread across those mentioned, plus transportation, utilities, marine, textiles, electronics, automation, electrical and mechanical systems, pharmaceutical, medtech, construction, agritech, digital - and my apologies to any I have missed. All have both significance as well as real gems of the very highest quality, and a depth of skills, technology and complementary approaches as a result.

Scotland may not be the biggest country, but in manufacturing terms that breadth and depth, and the examples of real excellence mean we are big enough to have size and scale - whilst at the same time, compact enough to throw a net over. That makes it easier to connect, to get to the right organisation or person to support, with a sense of community that wants to help. Big enough to count, small enough to connect fast and help each other.

Even an optimist like me couldn’t deliver a keynote consisting only of sunny and bright uplands, and in seeking balance I could pick a few key challenges for this; energy stability and pricing, material availability and pricing, interest rates and the cost of labour all make it to the shortlist, however only one clearly tops the list: skills.

For those that recognise a familiar soapbox, it’s a fair characterisation, but here I want to unpack an example that illustrates why it’s a challenge that we aren’t successfully articulating and what we think is needed to do something about it.

For Scotland, we don’t believe we spend enough of our skills budget on work-based learning apprenticeships - it’s just 2% of our overall spend on education and skills. Increasing this investment will provide the future skills for what we currently manufacture and more importantly for the additional infrastructure and systems that will be needed to decarbonise everything we do to give humans a chance of remaining on this planet. We accept that there are no magic money trees, but believe that means we need to make better decisions on where we spend the precious budget we do have, by correlating the spend we make on skills to the economic and societal benefit it brings. Our challenge is that economists tend to look at future skills demand using primarily historical data that doesn’t take sufficient account of the known demand and opportunities that exist, resulting in a significantly underestimated requirement for skills investment to make us competitive.

Skills Development Scotland’s sector skills assessments are excellent tools that we rely on for insight for industry, but they too reflect this same historical view for projection forward. Reviewing the most recent engineering, energy, and food and drink manufacturing assessments, if you aggregate the demand up to 2026, this indicates that we will need to replace 13,300 skilled employees due to retirements and migration, but the overall number of people working in the sector is projected to fall by 2,000 over the same period. In my opinion that’s an inaccurate and downbeat assessment of the engineering and manufacturing sector’s prospects, yet still amounts to a need for 11,000 skilled people in two years’ time.

That’s why I said earlier that we need to articulate this challenge more convincingly, and our response has come from a suggestion from an active industry leader in Yan Tiefenbrun, managing director of Castle Precision Engineering.

He proposed to use the structure and job codes of our existing salary benchmark survey to map the future demand and capacity to train forecast by industry, and then use that to help illustrate the economic benefit that can be gained - or lost - by prioritising skills spend to support. The task to deliver this has been picked up by a skills subgroup of the Aerospace, Defence and Space Industry Leadership Group for Scotland including ADS Scotland, Skills Development Scotland, and the National Manufacturing Institute for Scotland’s manufacturing skills academy. Allied organisations like CEED, Scottish Renewables and Technology Scotland have also volunteered to share the survey in their networks to help us gather as much objective data for this as possible, highlighting both the sense of partnership this industry enjoys, and a collective understanding of just how important the next steps for skills for industry are.

Paul Sheerin is chief executive of Scottish Engineering