Scotland’s industrial companies are investing in training and offering more flexible working to meet skills shortages in a sector that continues to defy wider predictions of an economic slowdown.

The trade group Scottish Engineering reported s a ninth consecutive quarter of rising orders and output, taking the industry into a third year of positive sentiment.

Half of responses to its latest quarterly survey reported increased orders and output, compared to one in five experiencing a decrease.  Around a third forecast increases for the coming three months, underlining that generally, the theme of “busy and stretched” continues. 

The data contradicts a UK-wide survey pointing to orders drying up amid a broader slowdown. The purchasing managers’ index (PMI), compiled by S&P Global and the Chartered Institute of Procurement and Supply, fell to a four-month low of 47.1 last month, down from 47.8 in April. A reading below 50 indicates decline.

The PM I report said new export orders dropped for a 16th consecutive month in May. There were reports of weaker intakes of new work from the US and Europe, which were linked to rising international competition and, in the case of the EU, customers switching to local sources to avoid post-Brexit trade and transportation complications, the survey found.

The Scottish Engineering survey paints a different picture with exports are up for the second quarter running, at 18% higher than the UK order net increase of 15%.  This year continues its overall optimistic outlook, with wider second quarter data reflected in a net 21% increase in optimism.

Finding – and keeping – the right skills continues to be the challenge that occupies businesses the most, creating capacity restrictions where those skills are in short supply, it said.

“Whilst staffing intentions  increased again (+12%) this emphasises the difficulties companies are still facing to recruit staff with the skills they seek,” said the report.

“Output volume shows significant further positivity on last quarter (+35%) suggesting that the restrictions on materials are easing for companies, and  capacity utilisation stays strong at a net 28%, a very slight decline from last quarter’s 31%.

Four out of ten companies increased their training investment in this last quarter while only one in 20 cut back, and four out of ten increased their staffing levels in the last three months and plan to do the same again. 

More than one in four (28%) now allows their shop floor employees to work flexibly in terms of variable start and finish times, with the ability to bank and take back hours.  The report found that 47% are likely to review their flexible working arrangements in the next twelve months.

“This does feel like a significant and rapid shift within our industry,” said chief executive Paul Sheerin. 

Compressed working weeks have been a longer-term feature of the sector, with shorter working Fridays or four-day weeks commonplace before Covid. 

More than a quarter (28%) of companies report that they already have a compressed working week in place, with a further 18% currently considering a move to a form of compressed working week.

“These results surprised the Scottish Engineering team with higher levels of use and consideration of flexible working than we would have expected,” he said.

“Companies adopting these arrangements report higher employee engagement and satisfaction as measured in their employee surveys, plus lower staff turnover, and for efficiency a range from gains to no detriment from the modified arrangement.  A positive view so far then which is more than welcome.”