Post Brexit uncertainty creates engineering slump

QR September 2016 – Press Release

The uncertainty surrounding the Brexit vote and the subsequent allusions to another Independence referendum by the First Minister, are exacerbating negative trading conditions for the engineering manufacturing sector in Scotland as witnessed by the results in the latest Quarterly Review of the industry published by Scottish Engineering.

The support group for Scotland’s engineering companies has seen a slump in orders and a sharp fall in output volume in the last quarter as well as a drop in employment levels.

Circumstances outwith the control of the Scottish economy, particularly the fall in Sterling against the Euro and Dollar, have impacted many costs for Scottish businesses.  Bryan Buchan, CEO of Scottish Engineering said: “We appear to have been hit on all fronts. The potential benefits of a weaker pound for exports have yet to be realised and our figures show there has been substantial downturn in export orders. At the same time, we have seen a significant rise in commodity prices, notably metals including nickel and zinc which is impacting directly on companies involved in fabrication and galvanising in particular.”

Order levels have been negative for eight consecutive quarters and have only been worse during the global slump of 2009.

Output volumes (21%up,31%same,48%down) are also at their lowest level since 2009.Staffng levels which have tended to be less volatile of late have dipped considerably (20%up,51%same,29%down) in this third quarter of 2016.

The guest writer in the Review, Lord Andrew Dunlop, Parliamentary Under-Secretary of State also comments on the result of the EU Referendum, stating: “There may be some turbulence ahead as our economy adjusts to this new reality and I fully recognise the concerns and questions which have arisen from the uncertainty of this decision for engineering businesses and their employees.”

He added: “I am pleased that the Treasury acted to secure the status of EU-funded projects, providing certainty in the medium-term on projects which are currently underway. It is important that we make it clear that the UK remains open for business.”

He concludes by suggesting that this Government: “Will hold fast to a vision of the UK that is respected abroad, tolerant at home, engaged in the world and working with our international partners to advance the prosperity and security of our nation, that truly works for everyone.”

Mr Buchan also hopes that the Bank of England’s recent package: “Will promote some improvement which will extend to our sector, but we now look to our new Chancellor Philip Hammond, to step in with further measures to defend our economy.”

BREXIT

Brexit comment by Bryan Buchan, Chief Executive, Scottish Engineering.

At the time of writing, we are starting to feel the force of the predicted maelstrom following the Brexit vote.

From an engineering manufacturing point of view, it is difficult to see any accrued benefit.  While the export market, which comprises Europe, has grown in the number of member states involved, in percentage terms it has fallen in value from some 54% to 42% over 12 years.  Still, however, a very significant market for ourselves, and equally we constitute a substantial market for European countries, notably accounting for 7.4% of German exports and 7% of French.  We are now plunged into an even deeper trench of uncertainty than that around the previous phases post-recession, with companies struggling to foresee the future and facing intangibles in terms of investment validity and potential scenarios for extended stagnation, or indeed reversal of growth.

Chaos prevails in the UK, with internal fracturing of the two major political parties, and a new Prime Minister in Theresa May bringing associated prevarication on the invocation of Article 50 to initiate the process of exit.  It would appear that our strongest ally within the block is the ever-pragmatic German Chancellor Angela Merkel; however, she will be facing an election next year and this should be a point of concern for our principal negotiator.  It is clear that if we wish to retain full access to the EU market in the manner of Norway, that a substantial contribution to EU funding will be called for, as will almost certainly free movement of people within these boundaries.  The promises of the ‘leave’ camp in terms of NHS funding have been exposed for the flagrant lies which they were, and their proponents have now virtually all existed stage left.  Therefore, we have given away a place at the bargaining table, devalued our currency and placed our economy, particularly financial services, at risk – for what?

What has brought us to this point appears to be anger on the part of the less advantaged areas of England and Wales in particular, fuelled by concerns over immigration, globalisation and EU social policies.  There is a stark division in the country with Scotland, Northern Ireland and Greater London clearly pro-EU.

Manufacturers will look to an easing in their export conditions, with the collapse of the Pound; however, this will be offset by significantly higher raw material costs when sourced from either Europe or the US.  One shaft of light might come from the fact that oil is priced in Dollars, and the price per-barrel realised price might now put some marginal fields back into contention in the UKCS, with a concomitant beneficial effect throughout the supply chain.

Engineering sector hit by uncertainty

Speaking on BBC Radio Scotland recently about the situation affecting the engineering industry in Scotland, Bryan Buchan, CEO of Scottish Engineering explained how the current levels of uncertainty were curtailing the industry.

“The Referendum vote is just another tranche of uncertainty and probably even more severe than those that have preceded it”, Mr Buchan explained.  “We are not seeing the type of investment we would expect to see in terms of capital equipment, and I think one of the major concerns now will be how do we attract inward investment when we are outwith the EU”, he added.

Speaking further on the investment situation, he explained how investment was drying up in the short term and that companies have been marking time from pre-Scottish referendum through the UK elections, and now the Brexit vote will also apply.

Mr Buchan said that Scotland’s manufacturing sector exports some 42% of its production to the EU making it an extremely important market, though it had contracted somewhat from 54% in 2002 to the 42% at the end of 2014.  Now emerging markets, he said, like India would be the targets for companies in the immediate future, but he did put a caveat on these activities being really successful, because a number of potential markets like Brazil had put on a range of tariffs making it extremely difficult to export.

He concluded by saying that the fall in the value of the pound would help exports by reducing our relative costs and adding to the value of receipts in Euros, while at the same time increasing the cost of goods brought in to Scotland and the UK.

Bryan Buchan, CEO, Scottish Engineering, speaking on BBC Radio Scotland, Tue 28 June 2016.

Primary Engineer & Scottish Engineering Special Leaders Award 2016

The Scottish Engineering Special Leaders Award (SESLA) is one of the Primary Engineer programmes that is coordinated in Scotland from the Scottish Engineering office in Glasgow.

The fourth edition of the SESLA has been the most popular and most successful to date.  This year, 8500 pupils from 130 schools sent in their amazing inventions.  It was then the unenviable task of the judges to grade the entries, select those inventions they believed should be shortlisted and, in the final stage, choose two winners per year group.  Our judges – drawn from academia, business and professional institutions – met at Scottish Engineering to choose numerous inventions that they considered should be Highly Commended, as well as two illustrations per participating school, to be put on display alongside the winning entries.  It was truly an arduous job.

The winning entries were presented with their trophies in the University of Strathclyde’s Barony Hall on Thursday 9th June 2016.

Scottish Engineering is delighted to be a supporter of Primary Engineer, and a huge thank you must also go to those other Primary Engineer’s supporters: The University of Strathclyde and the Faculty of Engineering; Doosan Babcock and The Institution of Mechanical Engineers.  Our thanks are also extended to all of the Scottish Engineering member companies, whose engineers kindly gave of their time to visit schools and inspire such a high level of creativity and innovation amongst the children.

Other Primary Engineer programmes include: Early Years Engineer, Primary Engineer, Secondary Engineer, The Institution of Primary Engineers, The Institution of Secondary Engineers and the Masters Level course ‘Engineering STEM Learning.  Many thanks to all the Scottish Engineering member companies who help them in their work.

To find out more about the Scottish Engineering Special Leaders Award 2016, please visit: www.leadersaward.com

If you would like to know more about supporting the programme or how to get involved with the SESLA 2017, please contact: editor@leadersaward.com

For more information about Primary Engineering programmes in general, please contact Chris Rochester, Primary Engineer Regional Director for Scotland: chris.rochester@primaryengineer.com

9.9.16 PRIMARY ENGINEER AWARDS

9.9.16 PRIMARY ENGINEER AWARDS

 

 

9.9.16 PRIMARY ENGINEER AWARDS

9.9.16 PRIMARY ENGINEER AWARDS

9.9.16 PRIMARY ENGINEER AWARDS

9.9.16 PRIMARY ENGINEER AWARDS

 

Scottish Engineering Members EU Poll – Press Release re results

Scottish Engineering, the support group for the industry in Scotland, has polled its members on the EU referendum.

From a survey of more than 350 companies, the response rate was 30%.

The questionnaire offered three responses, which resulted in 78% wishing to remain in the EU, 6% wishing to exit, and the final 16% had no preference.

 

 

MANUFACTURING ENGINEERING SECTOR HOLDING STEADY

Trends for the engineering industry in Scotland for the second quarter of 2016 are virtually the same as for the first quarter – suggesting that the manufacturing sector in Scotland is holding steady if not advancing.

 

Bryan Buchan, CEO of Scottish Engineering, who produce the Quarterly Review of the industry’s behaviour said: “It is fair to say that our sector as a whole is suffering from stagnation, borne out of the effects of the long term drop in oil prices coupled to a global economic retrenchment, with very low growth other than in China and India”.

 

The report states that both order intake and output volume are flat, there is no movement in capital investment and prices continue to be squeezed.

 

Within the order intake of both small companies (28% up, 28% same, 44% down) and medium sized companies (23% up, 35% same, 42% down) there are more companies who are seeing their order levels drop that are seeing them improve. This is, of course, reflected in output volume which also has negative returns from both small (32% up, 24% same, 44% down) and medium sized companies (19% up, 49% same, 32% down).

 

Mr Buchan added: “We appear to be marking time in terms of capital investment – partly due to market conditions arising from reduced activity in the UKCS and also in yet another tranche of uncertainty in terms of the imminent EU Referendum. Our sector is little different to the UK economy as a whole where growth slowed in Q1 and is expected to do so further in Q2.

 

“Although CPI inflation remains well below the 2% target and the bank rate is held again at 0.5%, there is optimism that movement in cost growth will come through next year. More immediately, there is some cheer at the time of writing, to see oil prices breach the $50 mark for the first time this year despite failure to agree production caps by Iran and Russia. This gives some hope of a limited recovery within the calendar year.

 

We can also point to some outstanding performances by specialist manufacturers in defence, heavy engineering, fabrication and electricals as evidenced by this year’s array of winners of Scottish Engineering awards”.

 

 

For further information contact Colin McGill on 0141 221 3181 or 07976 224412 or visit the Scottish Engineering website on www.scottishengineering.org.uk

Scottish Engineering Annual Award Winners 2016

Photos of the 2016 Award Winners

2014

Scottish Engineering Main Award 2016  Left to right: John Howie, President of Scottish Engineering; Bryan Buchan, CEO of Scottish Engineering; Rodney Ayre, Ops Manager at Mitsubishi Air Con Systems; Yoshihiro Sumida, President at Mitsubishi Electric Air Con Systems; Vice Admiral Simon Lister CB OBE FREng, Royal Navy; Yoshihiro Takahashi, Senior Business Development Manager at Mitsubishi Electric Air Con Systems, and Iain Mawer of Mitsubishi Electric Air Con Systems

 

2014

Mr Yoshihiro Sumida accepting the Award on behalf of Mitsubishi Electric Air Con Systems

2014

President’s Award for Outstanding Achievement 2016  Left to right: Bryan Buchan, CEO of Scottish Engineering; Scott McClelland, Head of Engineering at BAE Systems Naval Ships; Vice Admiral Simon Lister CB OBE FREng, Royal Navy

2014

President’s Award for Outstanding Achievement 2016  Left to right: Bryan Buchan, CEO of Scottish Engineering; Stewart Miller, Operations Director of Bosch Rexroth Ltd; Vice Admiral Simon Lister CB OBE FREng, Royal Navy

2014

President’s Award for Outstanding Achievement 2016  Left to right: Bryan Buchan, CEO of Scottish Engineering; Michael Peoples, General Manager of Clyde Bergemann Ltd; Vice Admiral Simon Lister CB OBE FREng, Royal Navy

2014

President;s Award for Outstanding Achievement 2016  Left to right: Bryan Buchan, CEO of Scottish Engineering; Simon Harrison, Managing Director of Had Fab Ltd; Vice Admiral Simon Lister CB OBE FREng, Royal Navy

2014

President’s Award for Outstanding Achievement 2016  Left to right: Bryan Buchan, CEO of Scottish Engineering; Stephen Edmiston,  Director of Operations at Ingenico UK Limited; Vice Admiral Simon Lister, CB OBE FREng, Royal Navy

2014

President’s Award for Outstanding Achievement 2016  Left to right: Bryan Buchan, CEO of Scottish Engineering; Forbes Prentice, Project Manager at Progress Rail Services; Calum Laird, Head of Cast Steel Products, Progress Rail Services; Vice Admiral Simon Lister CB OBE FREng, Royal Navy

2014

Scottish Engineering / Incorporation of Hammermen of Glasgow Award 2016  Left to right: Bryan Buchan, CEO of Scottish Engineering; Ashley Nicholson, Harbour Master at Forth Ports Limited; Vice Admiral Simon Lister CB OBE FREng, Royal Navy; Peter McCarthy, Deacon of the Incorporation of Hammermen of Glasgow

Scottish Engineering Annual Awards Dinner 2016

The Scottish Engineering Annual Awards Dinner 2016 was hailed as another great success, with over 350 guests attending.

Our Awards Dinner, held in the Marriott Hotel, Glasgow, celebrated the continuing excellence in manufacturing engineering throughout Scotland.  Bryan Buchan, CEO of Scottish Engineering hosted the event, where the Principal Guest Speaker was Vice Admiral Simon Lister CB OBE FREng.  His keynote speech praised the workforce and operations at the Babcock naval bases at Rosyth and Faslane, as well as support organisations such as BAE Systems and Thales.  He also commented that engineering and manufacturing in Scotland play a key role in the defence and stability of the whole of the UK.

The Winner of this year’s Scottish Engineering Award was: Mitsubishi Electric Air Conditioning Systems (Europe) Ltd based in Livingston.

The company was established in Scotland in 1993 and after the recession in their principal export markets in Europe, they improved their turnover between financial year-ends 2013 and 2015 of 178% and almost doubled their staffing level from 479 to 910.  The factory has been extended by 10,000 square metres to 54,000 square metres.  They have secured the R&D centre for Europe in Scotland and have now established a design and development centre at Livingston – the first outside Japan.

2014

Left to right: John Howie, President of Scottish Engineering; Bryan Buchan, Chief Executive of Scottish Engineering; Rodney Ayre, Operations Manager at Mitsubishi Electric Air-Con Systems; Yoshihiro Sumida, President of Mitsubishi Electric Air-Con Systems; Vice Admiral Simon Lister CB OBE FREng, Royal Navy; Yoshihiro Takahashi, Senior Business Development Manager at Mitsubishi Electric Air-Con Systems, and Iain Mawer of Mitsubishi Electric Air-Con Systems.

Rodney Ayre, Yoshihiro Sumida, Yoshihiro Takahashi and Iain Mawer accepted the Award, and you can read more at the foot of front page.

We presented six President’s Awards for Outstanding Achievement, which were given to:

BAE Systems Naval Ships

Bosch Rexroth Ltd

Clyde Bergemann Ltd

Had Fab Ltd

Ingenico UK Limited

Progress Rail Service UK Limited

The Winner of the Scottish Engineering Incorporation of Hammermen of Glasgow Award was given to: Ashley Nicholson of Forth Ports Limited.

Business Rates – Comment from Bryan Buchan

The imposition of an additional levy on business rates is a burden which an already-struggling manufacturing and engineering sector can ill-afford. Given the avowed intention to support and promote our sector in the recently-published “Manufacturing Future”, this seems directly at variance with Scottish Government policy.  As the threshold is at a lowly £35k of rateable value, many relatively small fish are going into the cod-end of this very wide net.

Bryan Buchan, Chief Executive.

May 2016

Annual Awards Dinner – Thursday 12 May 2016

Our Annual Awards Dinner is being held on Thursday 12th May 2016 at the Marriott Hotel, Glasgow.  Places are going fast, so book your table now.

2016 Annual Dinner info