Brexit: Engineering rebounds but ‘lack of easily available skills from EU’

SCOTLAND’S engineering sector has enjoyed a second consecutive quarter of strong growth in overall orders, output, exports and staffing, but is facing skills shortages and challenges around material prices and availability and logistics, a key survey shows.

Industry body Scottish Engineering, publishing the results of its third-quarter survey of members today, says “it feels like we can now release some optimism given that we are on an upward curve for the second quarter in a row”.

It adds: “The forecasts that we viewed three months ago with caution have held up well, and the outlook for the next quarter looks to hold that gain and, whilst it’s not yet positive for all, improvement seems to be on its way across the board.”

However, Scottish Engineering chief executive Paul Sheerin highlighted major continuing challenges facing the sector, even following the removal of most lockdown measures. And he cited the impact of Brexit in the context of skills shortages.

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Mr Sheerin said: “Challenges remain, and front and centre for these are material pricing, availability, and the logistics capacity to get components and raw materials in, and especially billable finished goods out. Skills availability issues return surprisingly quickly, and a lack of easily available skills from EU countries [is] cited as a contributor to that deficit.”

Scottish Engineering also flags labour market difficulties arising from the coronavirus pandemic, in terms of the number of new apprenticeships.

It says: “In considering the long-term outlook for skills, the intentions for apprentice intakes for 2021 underline that the financial impact of Covid-19 is limiting intake.”

While declaring the latest quarterly survey findings had generated “a welcome sigh of relief”, Scottish Engineering adds: “Additional resource, particularly skilled, does not seem to be readily available and notes of caution on intention for apprentices’ numbers brings concern that our skills gap will only widen.”

Subtracting the proportion reporting a decline from that achieving an increase, a net 27 per cent of survey respondents reported a rise in UK orders for the latest quarter. And a balance of 15% posted an increase in export orders.

Meanwhile, a net 21% of engineering companies in Scotland which responded to the survey reported a rise in optimism.

A balance of 19% posted a rise in output volumes for the latest quarter, with a net 20% reporting an increase in staffing. Meanwhile, a balance of 17% of companies flagged an increase in investment.

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Scottish Engineering highlights expectations among companies that strong growth will continue across the various activity measures.

A balance of 36% of survey respondents predict a rise in orders over the next three months, with both domestic and export business expected to show significant increases.

Meanwhile, a net 37% of engineering companies in Scotland forecast an increase in output volume over the next three months. A further increase in staffing is projected.

However, the survey signals inflationary pressures, amid supply-chain disruption. Respective balances of 47% and 46% of companies reported increases in UK and export prices during the latest quarter.

Scottish Engineering notes output prices “continue to reflect raw material price increases”.

Mr Sheerin said: “We can allow ourselves to be upbeat with this improving forecast, even though the ongoing challenges will make this anything but plain sailing. The resilience and adaptation companies have shown to manage their way through the last 18 months has been inspiring and, as ever despite the adversity, there have been shining examples of success throughout.”

He flagged the urgency of increasing apprenticeship intake, emphasising the impact of “financial pressures”.

Mr Sheerin noted “potential loss of trained staff after years of investment, and a lack of financial support initiatives are also cited for holding back increasing numbers”.

He said: “We asked companies in this review to outline their intentions this year for apprentices, recognising that they are such a key part of our future skills and resource, and knowing that in 2020 apprentice starts were significantly below the level required to maintain status quo in skills.

“The feedback from companies underlines that the impact of Covid remains with us as, despite the buoyant outlook in orders, companies reviewing their financial strength are reticent to invest in long-term skills at this time, an understandable position even if its longer-term impact causes concern. Companies have told us that financial pressures are the most significant reason for limiting intake, followed by a lack of available training resource to deliver a quality learning environment.”

Mr Sheerin added: “We need to find solutions to these obstacles quickly, as every year that sees an intake below that required to just stand still is a future headache for our sector.”

The Herald Scotland

The Herald Scotland

The Herald is a Scottish broadsheet newspaper founded in 1783. The Herald is the longest running national newspaper in the world and is the eighth oldest daily paper in the world. The title was simplified from The Glasgow Herald in 1992