Scotland’s industrial companies are hoping an increase in the UK’s defence budget will help reverse a sharp decline in orders in the last three months.

The latest quarterly report from trade body Scottish Engineering revealed a doubling in the rate of decline in orders and output as well as an increase in companies seeking advice on potential redundancies.

“Our responses showed that 17% of companies will implement a reduction in employees through redundancy, and a further 24% are currently considering a reduction through redundancy,” said chief executive Paul Sheerin.

However, he added: “The increased defence spend is good news for Scotland’s engineering and manufacturing economy in the mid to longer term.  

“Confirmation of the release of some of those projects – particularly in our traditional energy sector – that are currently on hold would be most welcome, as they would generate the fastest flow of orders and the accompanying boost that goes with it.” 

Last year Scottish Engineering saw a four-fold increase in members entering administration and ultimately closure compared with 2023, and in all cases the cash position of the business was the driver following the difficulties of the pandemic, increased energy costs and borrowings.  

Companies are alleviating these impacts by considering or will impact a hiring freeze to offset increased costs (31%), while 19% are considering or will decrease apprentice training. The majority (61%) will increase product pricing and 45% are likely to freeze pay.

Companies look to Middle East

A separate survey found that UK businesses are increasingly turning to the Middle East as a prime investment destination, with interest in the region doubling in recent years.

According to new research by communications consultancy Pagefield, more than a third (36%) of UK business leaders now see the Middle East as a key investment hub for the next five years – up from just 18% who have previously invested there.

Asia is also emerging as a hotspot, with interest rising from 22% to 32%, as UK firms look to strengthen their global market presence.

However, Europe remains the top priority, with 55% of UK firms identifying it as their primary overseas investment destination. Investment in the US remains steady (42% current vs. 45% prospective investors), but new trade tariffs under President Trump’s administration pose uncertainty, potentially deterring future deals.