Scottish engineers ‘holding up’ in face of economic blues

● Review of sector comes as UK manufacturing activity suffers dip

Scotland’s engineering sector is “holding up well” in the face of political and economic uncertainty, industry leaders said today.

Publishing its latest quarterly review, trade body Scottish Engineering said optimism remained high, with companies of all sizes and across all sectors positive about their prospects for the next three months.

However, the report points to weakness in UK sales margins, while there was a warning over the potential negative impact of higher personal tax rates north of the Border.

Bryan Buchan, chief executive of Scottish Engineering, said: “We are delighted to see that the figures produced by our manufacturing sector are maintaining the healthy form that we saw throughout last year.

“Two aspects which make me particularly pleased are that export orders remain strong and prices are showing considerable improvement. When speaking to companies around the country I get the distinct impression that our industry is doing what it does best – getting on with the job in hand.”

But he added a note of caution, warning: “The Scottish Budget has been approved and industry views with concern the adverse income tax differential which this brings. It is to be hoped it is not the thin end of a much thicker wedge.”

The report showed resilient levels of optimism among engineering businesses, with 38 per cent of firms reporting a rise, 49 per cent holding firm and the remaining 13 per cent citing a downturn.

Staffing intentions were positive for the sixth consecutive quarter though the trend has weakened slightly. Similarly, the levels of overtime working being undertaken by businesses remains high, though down modestly on the previous quarter.

Meanwhile, it emerged yesterday that activity in Britain’s manufacturing sector had drifted to an eight-month low in February as a jump in new orders failed to counter a slowdown in production.

The closely watched Markit/ Cips UK manufacturing purchasing managers’ index (PMI) showed a reading of 55.2 last month, down from January’s 55.3, but above economist expectations of 55. Any reading above 50 denotes growth.

The survey revealed robust demand for UK goods last month as new export business saw close to two years of consecutive month-on-month growth.

While the US, China, Europe, Brazilandeastasiaallshowed a healthy appetite for Britishmade products, the pace of expansion slipped to its lowest level for fourth months.

Andy Hall, head of corporate banking, central Scotland at Barclays, said: “Production in the sector may be lagging compared to the closing months of last year but UK manufacturing output remains in positive territory with demand still strong. That said… the continuing uncertainty over Brexit negotiations can’t be helping investment intentions.”