Scott Reid: Green shoots may have sprouted for engineers

Scottish Engineering's latest snapshot provides a glimmer of hope for a sector that has not had its troubles to seek in recent times.

The engineering sector is improving from a 'pretty low base', says Scott Reid. Picture: Andrew Milligan/PA Wire

Encouragingly, the trade body has flagged an improvement in orders, output and staffing in the closing months of 2016. Granted, after seven quarters of negative results, the pick-up can be seen as coming from a pretty low base.

Having been bruised by the fall-out from the global financial crisis, Scottish engineering businesses have faced unrelenting pricing pressures, a squeeze on capital investment, skills shortages and a collapse in the price of a barrel of crude.

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The news yesterday that Rolls-Royce is to take the axe to hundreds of jobs at its embattled marine business, with implications for UK sites, including one in Fife, is therefore unwelcome.

It coincided with the publication of the latest manufacturing purchasing managers’ index, which revealed that output had eased back last month as industrial businesses grappled with higher input costs triggered by the Brexit-hit pound. While the headline reading of 53.4 was down on the 54.2 recorded in October, it remains comfortably ahead of the 50 mark that separates growth from contraction.

However, the Scottish Engineering report suggests that manufacturers north of the Border are lagging their counterparts elsewhere in the UK.

Chief executive Bryan Buchan suggests that indigenous businesses have yet to seeing the benefit of the fall in sterling due to the fact that the UK accounts for almost £50 billion of Scotland’s total exports, compared to £11.6bn to the EU and just over £15bn to the rest of the world – excluding oil and gas. Bosses are clutching to the hope that the Chancellor’s Autumn Statement promise of increased spending on infrastructure and productivity will offer support. A rebound in oil prices following this week’s tentative Opec agreement is another positive.

Global-facing businesses will be further praying that forthcoming trade negotiations in the wake of Britain’s decision to quit the EU are swift and constructive.

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