HS2 offers a light in tunnel for Scots engineering

Scottish firms have the potential to win a share of �10 billion HS2 high speed rail projects. Picture: Contributed
Scottish firms have the potential to win a share of �10 billion HS2 high speed rail projects. Picture: Contributed
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SCOTTISH engineering firms are continuing to suffer from the impact of the depressed oil price, with flat order books and both output and staffing levels falling, according to an industry report.

The latest quarterly survey from Scottish Engineering yesterday – which came as UK-wide figures also showed factory output easing – found that the fourth quarter of 2015 has continued the trend in the previous three, with the strong pound also curtailing export activities across the board.

But the potential for Scottish firms to win a share of the £10 billion of supply chain contracts available under the HS2 high speed rail projects offers some hope for improving fortunes for the sector, the survey said.

Bryan Buchan, chief executive of Scottish Engineering, said: “HS2 is the biggest UK project for some time. If the timescales for the work remain on time, then this could be an important opportunity for our home-grown companies.”

Buchan said although the low oil price was having a devastating effect on many firms in the sector in Scotland, there was a “slight break in the clouds” as the displacement of staff from the oil and gas sector had led to some easing of the long‑standing skills shortages across the Central Belt.

But he warned: “This is not a panacea as a number of companies which provide sub-contract services to the oil and gas sector are themselves recording a drop in orders. But it is allowing us some degree of hope for the future.”

The quarterly figures showed that 27 per cent of engineering firms had seen a rising order intake level over the past three months, but 47 per cent reported a fall.

The Scottish report came as the closely watched CIPS/Markit purchasing managers’ index survey posted a reading of 52.7 in November – where 50 separates growth from contraction. This was a greater-than expected shortfall on October’s revised 55.2 figure, although that was a 16-month high.

The CIPS/Markit report said that export levels rose for the third consecutive month, but that the strongest growth came from consumer goods producers.

Rob Dobson, senior economist at Markit, said: “While the improvement in recent months is a welcome trend, scratching beneath the surface of the manufacturing numbers exposes a number of weaknesses.

“Growth remains heavily focused on the domestic consumer, while the strong gains at large-scale producers have yet to filter through to SMEs.” Manufacturing accounts for 12 per cent of UK GDP.