Scottish engineering sector optimistic despite orders ending growth run in Q3

Forecasts for the Scottish engineering industry for the coming quarter remain “broadly positive” for most company sizes and subsectors, the profession’s trade body has said as it uncovered a mixed Q3 scorecard.

Scottish Engineering CEO Paul Sheerin says: 'We opt to reserve judgement, mindful of the importance – and fragility – of business confidence in shaping our economy.' Picture: Guy Hinks.

Glasgow-based Scottish Engineering has, in its chief executive’s report for the third quarter that it has published today, revealed that the run of increased orders that the sector has enjoyed since the middle of 2021 came to an end during the period. UK orders were down by a balance of -12 per cent, while those for exports were down by -11 per cent. However, optimism was up +12 per cent.

The trade body cited feedback from members pointing to the impact of the UK’s steeply rising interest rates having a knock-on effect in construction, and steelwork fabrication in particular, “alongside a case for patience as our annual work and holiday pattern return to something closer to the cycle we would see prepandemic”.

Other metrics showing improvement included output volume, up +11 per cent, while employee numbers were positive for firms of all sizes, at +14 per cent for both small and medium companies, and +25 per cent for large firms. Looking at the coming three months, members predicted a net increase of +24 per cent of businesses having increased orders, and twice as strong for UK orders than for exports.

Scottish Engineering, which last year appointed the first female president in its history, added that looking forward, an important index from Q3 shows that plans for capital investment have been on an increasing trend for the last 18 months. A quarter of companies are planning an increased level of investment in this area, despite continuing cost challenges for people, materials and energy reported by almost three quarters of companies, it also said.

Paul Sheerin, chief executive of Scottish Engineering, said: “It’s always difficult where the pendulum for a key measurable swings from positive to negative to balance a reaction which faces facts versus choosing to call for patience. In this case with other indices remaining positive and a look back at a normal summer order profile, we opt to reserve judgement, mindful of the importance – and fragility – of business confidence in shaping our economy.”

The report comes after a separate study found that business confidence in Scotland nudged higher this month.