Q2 report

Manufacturers remain upbeat despite price pressures

women female engineeer (Institute of Engineering and Technology)
Engineering companies remain optimistic about prospects

Scotland’s manufacturers continue to face pressures from rising prices and skills shortages, but remain optimistic about their prospects, according to new data.

Orders, exports, investment and output remained in positive territory in the last quarter, although there are signs of weakness resulting from rising inflation, particularly the higher cost of fuel and raw materials.

Trade body Scottish Engineering said in its latest quarterly report that pricing “perhaps more than any” stands out as an indicator of direction with 68% of companies increasing UK prices in the last quarter, while 42% reported reduced margins.

“Understandably, optimism has cooled since our last report, but still remains positive, and the need for skills is underlined by one third of companies increasing staffing levels in the last three months, with a similar intent forecast forward,” said the Q2 report.

Training investment plans remain strong, matching the mood we hear in training groups and colleges for an increased demand for new start apprentices alongside up-skilling and re-skilling programmes for current staff.”

Paul Sheerin, chief executive of Scottish Engineering, said: “A fifth successive quarter of positive principal measures might feel like something worth celebrating, and whilst there are signs of softening in the upward rate, we surely expected a sharper response than the levelling seen here, given the escalation in global turmoil of the last few months. 

“This muted response feels out of step with the continuing and deepening uncertainty that the feared invasion of Ukraine not only happened with devastating and ongoing humanitarian costs, but also underlined the interconnected and fragile nature of global supply chains.

“Once again, in the last two years, we learned that it’s easy to take certain commodities for granted until they stop. The knock-on effect to gas and electricity costs has been added to the long line of other challenges, especially hard-hitting for a sector with a strong proportion of energy intensive operations.”

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Mr Sheerin said companies were stepping up their efforts to meet the challenges they face.

“The logistics and materials headaches remain, and despite some very cold economic winds blowing our way, it is testament to our sector that we remain in positive territory,” he says.

“To stay there will require amazing efforts from all in the sector on innovation, product leadership and driving efficiency – it will not happen with fingers crossed alone. In terms of business threats, pole position is once again held by skills, regularly cited as the economic speed limiter that sets the maximum output for a business”

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