Dear Member,
In this month’s herald article, we discuss the manufacturing sectors that have been hit hardest by COVID-19 and stress the importance of protecting sectors that are at risk
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Category Archive: COVIDPress Releases
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The contents of this quarter’s review should come with a health warning, as reading it will not be a pleasant experience, and those of a nervous disposition should perhaps look away now. It is widely anticipated that we are now in the second UK wide recession of this century, and its perhaps helpful to compare the corresponding Scottish Engineering quarterly report from the financial crash, a measure to gauge how concerned we should be. On those simple terms, our anxiety would be justified, as both the magnitude and the rate of change of key measures is shocking, perhaps reflected most acutely in optimism. In Q3 2008, technically the second consecutive quarter of recession, optimism fell from +3% to -10%, and went on to register a low point of -47% in Q1 2009. In this report, with recession not even technically confirmed yet, we record an 80% fall in optimism from +17% to -63% in the space of only three months.
This pace of change reflects the depth of impact we have all felt both as companies and individuals since Covid-19 became central to our lives, and that speed is key to thinking about how we will recover. The 2008 recession came from an unsustainable financial system, but what we currently face is clearly very different, an economic shock wave built wholly on a global health crisis. Whatever the cause, the potential impacts to industry are all too familiar, and begs the question of what should our collective response be to minimise impact and maximise the speed of recovery? Where should we spend the precious resources we choose to make available to get the maximum return?
I feel confident that I speak for most of our members when I state that the first action on that list is for government guidance to manufacturers across the UK to re-align and stay aligned. I also understand and agree with the Scottish Government’s focus on public health and have only praise for the leadership which has been consistent and clear in ways that others have not. However, the potential for damage to the manufacturing sector is too great if Scotland earns a tag that it is closed for business whilst the rest of the UK is not, and I would argue that both the public health priority and guidance alignment can be jointly achieved without detriment to each other. Since the start of this crisis, we estimate that 70% of manufacturers have remained open in Scotland, and in this survey, we now see over 90% operating at some level. That these operations have been achieved whilst Scotland has seen a decline in Covid-19 cases, and especially the all-important R-number, underlines our belief that few industries are better placed to safely operate in these times due to high average area per person workplaces, and a risk assessment led approach to operating having been embedded for many years. Our expectation is that Covid-19 will ebb and flow before vaccine or treatment options emerge, and so a supportive, coordinated, and matched message to manufacturers from both Scottish and UK Governments is essential to minimise damage.
Our second ask comes from a view that outlines that recovery will likely come from the collective actions of excellence in organisations, those with a strong mutual will for survival, guided and included every step of the way by exceptional leadership. Those businesses will take tough decisions, whilst seeking the digitally advantaged silver linings in the cloud that has been coronavirus. The role of government in that playbook is to provide stimulus, and ensure that when recovery comes, as it surely will, we have incentivised actions that protect our future. The job retention, grant and loan schemes have been lifelines for companies, and more will be needed to ensure that critical companies in the hardest hit sectors have the support they need to survive. Beyond that, our industry cannot afford to lose the momentum building in apprenticeships that is essential to rebalancing the age distribution of skills in our sector. Survival is everything, and those tough decisions will mean postponing, reducing, or cancelling engineering apprenticeships across Scotland, an outcome that would jeopardise our future. For that reason, when we consider the options to reduce the impact of unemployment for young people, we must incentivise employers to maintain and where possible extend apprenticeships in the Engineering, Care and other sector workplaces.
In a time of economic turmoil, we are grateful to welcome back Gary Gillespie, Chief Economist for the Scottish Government to share his thoughts for our current predicament and our potential routes to recovery, and we appreciate that he has taken the time to support Scottish Engineering members with this insight.
Finally, to all our members, and your families, the team at Scottish Engineering wish you well in these exceptionally difficult times and stand ready to help you in any way we can.
Paul Sheerin
Chief Executive
Scottish Engineering
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Herald Article 20th April 2020
Dear Member,
Scottish Engineering has been invited to write a monthly article for The Herald, and in this first article we highlight the potential damage to Scottish manufacturing engineering of the differing guidance of the Scottish and UK Governments.
Click here to view the article.
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In our final 2019 review of Scotland’s Engineering Manufacturing sector we delicately described results as “chastening”, with confidence matching orders in steep decline, and we feared that the resilience shown in our sector had reached the bottom of its reserve. This week I opened the results of our newest survey with extra interest, as I hoped to see some hard evidence that the positive reports I have heard from member companies since the beginning of January would be reflected in the numbers returned. At this point the words of a former boss as I celebrated a month of positive results after many months negative rang in my ears: “One swallow does not a summer make”.
So even with that note of caution, it’s highly encouraging to see indices that match the conversations. Export and UK orders down in the last three months certainly reflects the mood and feedback in the final months of last year, but it’s the twenty-twopoint swing in business confidence from negative to positive since last quarter that really grabs the eye. We can see the probable driver of that in orders for the next three months – UK up by 35% and Export by 27% compared to last quarter – and output gets the pickup you would expect. These are very welcome signs of recovery indeed, and whilst Brexit has a long way to go before being anywhere near “done”, its encouraging to see that the world in the meantime continues to turn, and many manufacturers feel the welcome pressure of a return to busier schedules.
An unwelcome point of clarity on Brexit this week was the UK Government’s confirmed plan to overhaul the immigration system, ending the EU freedom of movement from 31 December 2020. This is disturbing news for our sector where the salary caps remain above ordinary operator level and many companies are already struggling to recruit semi-skilled staff. Given Scotland’s forecast population shrinkage, a more flexible immigration system which reflects the needs of our labour market is still required. To different busy schedules, and although the Global Climate Conference COP26 will be based in Glasgow this November, the likelihood is that wider Scotland will feel the effects of the sheer numbers of visitors. With almost 200 world leaders visiting and an estimated 30,000 delegates, this should keep the hotel sector in central Scotland fairly busy – but what about the expected Climate Protesters? The recently held COP25 in Madrid had an estimated 500,000 Climate protesters, and that Conference did not have the World leaders in attendance, so it’s reasonable to expect the same or even more. Whilst the impact of this volume of visitors would be significant, the key purpose of the conference remains to set agreement on meaningful action to reduce the impact of human activity on climate change. Recognising that this talking point will never be far away this year, we added questions to our survey this quarter to understand industry’s views on the topic, with the following key results:
- A strong majority of respondents (92%) reported that their organisations recognise that the declared climate emergency is real and requires an urgent response
- Close to two thirds (64%) say their organisation is actively pursuing operational changes that will support reduced climate impact, with more than half (53%) stating they are actively pursuing product/service design changes or diversification to support reduced climate impact.
- When asked to describe the organisation’s view of the threat or opportunity that the business faces from this, 43% stated they were concerned, 3% deeply concerned, 36% neutral, and 16% and 2% saw opportunity and strong opportunity respectively
These responses demonstrate an honest and pragmatic approach to the issue, with comments underlining that while business understands their responsibility to be a part of the solution, our governments also need to ensure that the support mechanisms and policy levers are there to help that transition in a clear, simple and easily accessible way.
We’ll close with a reminder that as we publish this report, Scottish Apprenticeship Week will be with us from the 2nd to the 6th of March, and we urge members to take time to celebrate the benefits that apprentices bring to business, individuals and our economy, and in turn encourage wider uptake on this crucial talent pipeline. If our busy quarter becomes a busy year, and leads to a busy decade, more than ever we need to create tomorrow’s resource, starting now.Paul Sheerin
Chief Executive
Scottish Engineering
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It seems difficult to believe that not only are we approaching the end of year, but also the end of another decade, and soon will be talking about the 2020’s. As a child of the 70’s and 80’s the last “20’s” were ancient history even to me, although at some time the phrase “The Roaring Twenties” became a familiar phrase. It was so called in reference to a decade of economic and cultural prosperity principally for Western Europe and the USA, and heralded dramatic progression and usage of now everyday items like cars, telephones, film, radio and eventually aviation as a business. In a nod to the decade’s dynamic cultural and social growth it was also known in France as the “Années Folles”.
In many ways the description of crazy years might feel a more appropriate description of the decade we are about to leave, but I can leave you to pick your own special adjective for these times. The indices within this final report of 2019 make for chastening reading, as it seems the resilience of our sector to the latest uncertainties have reached their limit. Whilst I can’t make those results look any better, what I can offer is a view forward on where we might place our collective efforts to make the 2020’s more roaring than crazy.
Politically, the UK is within weeks of going to the polls for the fifth time in five years between our Europe Referendum, General and European elections, and so it’s understandable that fatigue for this uncertainty would lead us to say just get it done, and both I and the concerning negative trends in this report couldn’t agree more. But a note of caution is required, because for Brexit it’s clear that where for some business the outcome will have little or no effect, for others the detail of this is critical, and so when we look across our community of engineering manufacturing, I would urge patience that we seek the right deal, not the fastest one. A transition agreement is just that, and the current deal on the table for the UK leaves a very short window in transition before a full trading agreement is slated to be in place. The political declaration which accompanies the current transition agreement is noticeably absent of the language of “frictionless trade” or “closest possible alignment” and leads to concern for divergence on regulatory alignment which parts of our industry are dependent on.
In 2020 Scotland will host the UN Climate Change Conference, (better known as COP26), and hopefully in due course another piece of common vocabulary will be replaced as “The Paris Agreement” becomes the “The Glasgow Agreement”. 2019 has been a year of sobering reflection as the data driven conclusions of scientists reported trends only sharpened by news reports of glacier ice loss around the globe and flooding closer to home. Climate change and the actions needed to offset it present a significant challenge to the status quo of our industry, however as Lindsay McQuade (CEO of Scottish Power Renewables), urged us when she addressed Scottish Engineering earlier this year, where better to look for solutions than the inherent problem solving and creativity of Engineering?
My final plea for a collective effort for the new decade returns to everyone’s favourite subject: skills and the current and future shortages which concern us all. For that I’d urge that despite the uncertainty and probable bumps in the road coming our way, maintain your commitment shown in this report to the actions that seed the future talent pipeline our industry will need. Invest in the foundation, modern and graduate apprentices as you have done, more if you can, and try to continue to say yes to work experience and student summer placements to ensure that those leaving school, further and higher education have the experience they need to work effectively in our industry.
Paul Sheerin
Chief Executive
Scottish Engineering
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Halloween Horrors Await
At our last quarterly briefing I talked of the joys of spring, the range of excellence we had just celebrated in our annual award winners, and the remarkable resilience of our sector despite never ending uncertainty. Clearly that was before our ‘summer’ arrived. In between wondering if a boat might be best for the daily commute, a new UK government was finally installed, and whilst the political pantomime shows no sign of abating, the mood music playing as an accompaniment has significantly changed.
Under our newest Prime Minister, the entry requirement to join the Cabinet of Government seems to require exclusively a firm belief in the values, aims and impact of Brexit, combined with a promise not to blink or think of the children if called to push through on a no-deal disorderly exit. Businesses of all sizes up and down the country recognise the danger of forming a management team that lacks diversity of thought, or the conviction to challenge internally, and yet this is what we will have leading UKplc at a time of unprecedented difficulty, representing an electorate that is deeply divided.
The stated policy of this Government at least publicly is that we aim to secure a deal with the EU. And how have they taken steps to achieve that? At the time of writing, this has publicly amounted to writing a four-page letter stating the UK Government’s position and expectations for change from the current backstop. Again, consider the response of any smart business leader, supervisor or employee across the country when asking how a dispute is to be resolved? Imagine receiving the answer of “Good News! – I have written a four page, possibly sarcastic, definitely patronising, email explaining where they have got it wrong”. Excellent, that ought to solve it then.
Except its doesn’t. There is no evidence of softer unseen diplomacy at work, only a statement that the UK will withdraw from EU meetings that they don’t see as essential, another example of brinksmanship negotiation, which even if successful, will ensure any future partnership maintains the trust level exhibited in the manner by which it was secured. Companies already have remarked on the drastically deteriorated relations with European trading partners as a result of this approach.
Meanwhile many businesses continue to outline that despite detailed planning for a no-deal outcome, including contingencies and alternate arrangements, the stark reality is that no-deal means wasted resource to secure work arounds, added costs for zero value and material uncertainty in business sustainability. On the same theme, this report includes responses on the importance of non-UK nationals to businesses to quantify concern around the UK government’s immigration white paper. Three in ten companies reported reliance on availability of this resource, and six in ten reject the proposed salary threshold of £30k for eligible roles. Our feedback to UK government is that we are deeply disappointed that the feedback given prior to the white paper seems to have been ignored, and this is underlined in 70% of our respondents voicing the need for flexibility in immigration policy which addresses Scotland’s unique needs.
It should come as no surprise then that this deeply concerning situation is reflected in the reported results from our sector looking at the last quarter. Orders are down, significantly for export, as are confidence and output, and our metal manufacturing sector unfortunately looks to have endured the toughest of quarters. Brighter points to note are a continued commitment to training and investment plans which is both welcomed and essential to future recovery.
For our back-page guest this edition, our contribution is from Scotland’s Bravest Manufacturing Company, an organisation that many members who make up a part of the supply chain to the UK’s Armed Forces I am sure will feel a connection to. I had the pleasure of visiting their manufacturing site with their Operations Manager Andy Russell, I hope you are as impressed to hear about it as I was.
Paul Sheerin
Chief Executive
Scottish Engineering
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Encouraging Forward Thinking For Skills
Spring in Scotland is now well under way, and it’s a significant time for us at Scottish Engineering as we celebrated our annual award winners just a few short weeks ago.
If spring is our best chance in the year for optimism, then our award winners did not disappoint, and we saw the range of excellence running from laser photonics through large scale high value metal manufacturing to mass volume drinks production. A tremendous range and diversity of engineering, with fantastic examples of strategic focus on improvement, investment and skills growth. Congratulations to all our award recipients, with a special mention for our overall winner, J&D Pierce (Contracts), whose mix of astonishing growth in business, infrastructure and skills captured the attention of our judging panel.
Given that skills remain the number one conversation we have with industry, it’s not surprising that all of our award winners stood out for their commitment and approach to training and skills, with engagement in local education long before the hiring process begins. We have remarked before that our future supply of talent faces several challenges:
- A currently historically low unemployment rate
- An aging workforce with low training rates in the age group following
- Competition for STEM candidates from other sectors and industry
- A projection of decreasing net migration, exacerbated by Brexit impacts
This quarter we asked members to share their plans for apprenticeship places in the next twelve months and mid-term timeframe, and encouragingly all areas show a planned increase. A healthy 47% of respondents plan an overall increase across all three streams of apprenticeships over the next three to five years, a level that underlines how seriously companies are taking the need to secure future skills. In the shorter term, perhaps unsurprisingly, the Modern Apprentice programme shows the most planned growth in the next twelve months, with over 43% of companies indicating plans for increased intake. The newer apprenticeship programmes for Foundation and Graduate streams showed lower increases of 16% and 21% respectively, and from that I think we can conclude that whilst the increase is welcome, we still have work to do to convince industry of the value of these work-based learning initiatives.
If we were giving ourselves a report card, let’s be generous and say we give ourselves a ‘B’, what next to drive this in right direction?
Well, if we start with supply of candidates, a continued theme in almost every forum and voiced by industry leaders is the need to concentrate our STEM resource in fewer and more effective projects – a ‘less is more’ approach. This will require compromise and some of us will have to stop what we currently do to join other programmes, but if we want a different outcome, choices like these will need to be made.
Looking beyond that, our survey asked employers what factors restricted their plans to increase the numbers of training places, and the most common answer highlighted a lack of training resource and time within smaller organisations to do justice to the training of more young people. With no magic wands that’s not easy to fix, but it is something we can look at with the agencies who support industry in Scotland to seek a solution.
And finally, we need to press the UK government to look again at the content of their Immigration policy proposal to take into account the differing needs of Scotland within the UK. The last thing that our manufacturing industry need is wider pressure across labour supply as a whole, whether that be for skilled engineering and technician roles, or just as importantly the operator group where we enjoy significant levels of EU nationals in our workplaces.
For our back page view this quarter, I am pleased to note we have a contribution from a friend of Scottish Engineering, Paul Nelson, who fulfilled our role as Employer Auditor whilst working at member company Allied Vehicles. Paul is now helping Scottish Autism, an organisation that reminds us of the value that employees on the Autism spectrum bring to all aspects of working life, in some cases particularly for engineering and manufacturing.
Paul Sheerin
Chief Executive
Scottish Engineering
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Support for MakeUK – Letter to the Government and the Opposition
Scottish Engineering was contacted by MakeUK (EEF), asking for our support for the attached letter to Government and Opposition. We were aware that other UK Engineering and Manufacturing member organisations were considering their support for this action also.
We chose to support this action, specifically because it aims not to criticise the origin or thwart the democratic process of Brexit, but states that the current method of delivering Brexit is not conducive to business stability and progression. It asks that if no deal can be found within the current and imminent deadline, then Article 50 should be revoked to allow clear headed review and a halt to the damaging cycle of short term delays that the current process to deliver Brexit is following.
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Groundhog Day
Welcome to our first Quarterly Report of 2019. We start not as we would wish with an optimistic view forward, but instead trapped in the never-ending Brexit cycle where immediate clarity is desperately needed, but never actually expected. The gift that keeps on giving simply cannot be ignored, for as Brexit blunders on, the timeline to avert a cliff edge withdrawal is scarily close and therefore uncomfortably real.
I attended this week the manufacturing conference of Make UK (renamed from EEF) and Brexit concerns were the returning headline topic throughout the day. Andrew Neil, fresh from his decision to end his weekly politics show and in uncharacteristically entertaining form, took no prisoners in analysing where we were and where we may be going. He commented that a case can be made that it’s not unusual to have an incompetent government, and it can equally be argued that there have been plenty cases of ineffective opposition. He suggested however that, unlike buses, for both to come along at the same time was highly unusual and a key reason for the chaos we are experiencing. In warming to his theme he stated that “Brexit would have been tough enough with competent people who knew what they were doing”. After painting this panic inducing picture, he added the now common observation that politics and particularly voter intentions no longer follow the established rules and entertained us with reference to a new billionaire class reminiscent of Donald Sutherland in The Hunger Games.
Against this almost dystopian view of our political landscape his view forward was for me surprising, an expectation that the most likely outcome was a late in the day compromise to get behind a form of the current deal on offer, with a backup possibility to extend from the end of March date still more likely than a no deal exit. This scenario was repeated through the day by those speakers representing the UK Government, albeit with more emphasis on the qualifying phrase ‘we are working as hard as possible to achieve…’. At the time of writing further distraction continues with resignation of MPs from the two main UK political parties, although it has to be acknowledged that these are for a variety of reasons. Nonetheless, it all adds to the noise, and subsequently I have to admit that it’s hard for me to see how the current political pantomime will stop in time to let such sense break out. It is however exactly what is needed and therefore we must once again hope for the best, whilst continuing to ready ourselves for all possible eventualities.
Against that background our Quarterly Review figures at first glance look broadly positive, with orders, output and staffing all showing significantly positive both in review and forecast. Concern exists that these figures may be boosted by understandable contingency planning that is raising inventory across supply chains. This view underlines that whatever inventory is being built, we all understand that this will need to be unwound to return working capital to optimum, and that unwinding may feel like a dip even if the real end user demand remains steady.
Regardless of what happens next, the world will keep turning and our Industry will do what it has done through every challenging period since industry began: rise to the challenge, make the most of the strengths and attributes our business communities undoubtedly have, and look to improve to increase competitiveness regardless of the obstacles arriving. In that respect its good to see that Capital and Training Investment plans remain positive, with Training Investment the highest as companies look to increase productivity through training.
For Scottish Engineering, a key addition to our training offer this year is our partnership programme with Equate Scotland and SEMTA, and I’m delighted that Talat Yaqoob, Director of Equate Scotland, has explained that programme in detail as our guest back page contributor. Improving our gender balance in Engineering and Manufacturing is compelling not because it’s the right thing to do but because it will improve our productivity and sector sustainability. Scottish Engineering see this programme as a key part of enabling that improvement, because in this respect, good intentions are not enough, change will require commitment to training and company culture to achieve this.
Paul Sheerin
Chief Executive
Scottish Engineering
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Skills Snobbery is a Wasted Opportunity
Welcome to Scottish Engineering’s final Quarterly Report for 2018, and as we write, it’s the time of year when wish lists are being written, and decisions are to be made on good behaviour or otherwise. With the political shenanigans currently never ending, I fear there will be a lot of coal in the stockings of our elected representatives this December. Those like me who expected clarity on our future relationship with Europe long before now, can surely now with confidence say: definitely next year.
So, while that uncertainty continues, lets return then to the second most popular topic our members have raised this year, skills and labour capacity in general. Last week it was reported that unemployment fell yet again in Scotland to 3.8%, and as evidenced in this report export and domestic orders continue to remain strong at least into the beginning of next year. There is no doubt that the first negative signs of Brexit have been felt by companies losing EU nationals from their workforce as they avoid uncertainty or the effects of weak Sterling and return home. Just to cap this picture, those employees moving from company to company on average can expect to receive 3 times the salary increase of those staying with their current employer. All these factors have placed a squeeze on companies having the labour resource they need, and companies report that difficulties to recruit are not just in skilled roles but extends to operator roles too.
At the risk of sounding unnecessarily downbeat, a further concern occurs to me. Industry 4.0 is here, and companies across the board are now implementing workstreams to make sense of the vast amounts of useful data being collected. Data driven innovation is active and increasing now, and manufacturing and engineering are not the only sectors that need these skills. In fact, the concern is that the growing demand for the people with the necessary skillset to train for these roles will inevitably come from the same ‘pot’ as we currently have, and that already is not enough to meet demand.
The solution must be a bigger ‘pot’ and one way to do that is changing the way we think about work-based learning, for which the entry point in Scotland is our Foundation Apprentice (FA) programme. Here S5 and S6 pupils undertake a mix of school, college and workplace-based learning, and on completion will hold a qualification equivalent to Higher grade, with a pathway to work, modern or graduate apprenticeship, or Further Higher Education.
So, what’s the problem? To put it bluntly, as a society we seem to hold a view that looks down on FA’s as the lowest rung of the ladder and are missing an opportunity as a result. FA’s give us the ability to engage early and steer young people into Engineering, and crucially allow us to capture the attention of young people where school for whatever reason doesn’t click for them but the world of work does. Many of us are or know colleagues who became excellent engineers, with less than stellar school exam results. Right now, modern apprentice and graduate routes leave those future talents behind and that’s a dreadful waste that we can’t afford. If that doesn’t convince you, look outward to Germany, a manufacturing and engineering example of best practice, where in 2015 the calculated share of population starting an apprenticeship was 52%, compared to less than 10% of school leavers in Scotland for the same period. As a final point to underline here, can I add Scottish Engineering’s congratulations to 18-year-old Fraser Wallace who this month was named Scotland’s Apprentice of the Year. Fraser was one of the first young people in the country to complete a Foundation Apprenticeship with Ayrshire College alongside work placements at aviation experts GE Caledonian, and having already impressed is now enrolled in a Modern Apprenticeship, with no doubt a bright future ahead.
Paul Sheerin
Chief Executive
Scottish Engineering