Engineering dips again

Oil and gas sector woes and election uncertainty hit activity

THE Scottish engineering sector has suffered falls in output and order intake for a second consecutive quarter, with the troubles of the oil and gas industry weighing on activity.

Scottish Engineering, publishing its latest survey of activity today, also believes that uncertainty in the run-up to the General Election played a part in the sector’s weakness in the latest quarter.

The survey also shows a seventh consecutive quarterly drop in the Scottish engineering sector’s export orders during the latest three months. This would appear to underline the extent to which Chancellor George Osborne’s March 2011 vision of “a Britain carried aloft by the march of the makers” has failed to materialise.

Industry body Scottish Engineering’s survey shows a second consecutive quarterly decline in employment levels in the sector in the latest three months, although the fall was modest. It also signals a significant fall in optimism.

And, overall, Scottish engineering companies are forecasting further falls in UK and export orders in the coming three months.

Scottish Engineering’s survey shows that, while 26 per cent of companies achieved a rise in output volume in the most recent quarter, 35 per cent experienced a fall, with the remainder reporting an unchanged position.

The net nine per cent posting a decline in the latest quarter indicated a slightly less steep fall in output volume than the balance of 12 per cent reporting a drop in the previous three months.

A net three per cent of Scottish engineering companies reported a fall in total order intake in the latest quarter, with 29 per cent achieving an increase but 32 per cent suffering a drop.

In the previous quarterly survey, a balance of one per cent of Scottish engineering firms had reported a fall in order intake.

Small and large companies, overall, reported sharp drops in orders, although medium-sized firms achieved an increase.

And, overall, the export picture was weak. While 20 per cent of Scottish engineering companies reported a rise in export orders in the latest three months, 39 per cent experienced a fall.

Scotland’s oil and gas industry has been hit hard in recent times by lower crude prices, with companies embarking on sharp cost-cutting drives.

Bryan Buchan, chief executive of Scottish Engineering, said of the latest survey findings: “This year’s second survey has undoubtedly been heavily influenced by the ongoing issues in the oil and gas sector, and by multiple anxieties in the run-up to the General Election.”

He added: “There is some sign of recovery in the former and, thankfully, the latter is now behind us, without the baggage of the much-anticipated hung Parliament.”

Mr Buchan meanwhile issued a plea for Prime Minister David Cameron’s promised referendum on UK membership of the European Union to be held next year, rather than in 2017, to avoid prolonged uncertainty.

He said that most of Scottish Engineering’s member companies would “hope for an amicable solution to the EU question, with Britain remaining in membership under more beneficial terms”.

Mr Buchan added: “We also feel that it is not in the best interests of the engineering manufacturing industry to have to wait until 2017 for the referendum. May, or autumn, of 2016 would be a much better proposition for companies considering investment in the UK, and of course Scotland.”

A survey published yesterday by the Chartered Institute of Procurement & Supply showed that the pace of growth of UK manufacturing activity remained modest in May.

The rate of expansion picked up slightly but not by as much as economists had projected. And growth in UK manufacturing remained way adrift of rates seen this time last year. Employment growth in the sector was marginal in May.