Chief Exec’s report Q1 2023

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Read the full Q1 2023 Quarterly Review


6 minute read


Two consecutive years of order and output growth are not trivial given the times we live in, but it’s worth rewinding to the only time that metric has been exceeded in the last 23 years.  From March 2003 to December 2007, the same set of questions we continue to monitor every three months returned a nostalgia-inducing 19 consecutive quarters of positive growth in orders and output, brought abruptly to an end by a financial crisis from which recovery was slow and painful to say the least.

The timeframe of that turndown is significant, as it also marked the start of the UK’s divergence from its peers in productivity – essentially flattening at the start of that financial crisis (as did other economies) but where other comparable nations recovered to their pre-crisis trajectory, we did not.

It’s an important consideration for where we find ourselves now, which is essentially constrained by a lack of skills and people more generally.  The same eight quarters in question have also contained a minimum of 30% of companies trying to increase staffing, with discussions confirming that these numbers contain intent to hire the roles they were trying to fill last quarter or replace those who left this quarter.

We believe that this unfulfilled demand for skills is directly related to this quarter’s measure of capacity utilisation, with 31% of companies responding that they are at full capacity.  In the last 8 years this is only the third quarter where that number has been above 30%, and in that time period the average number of companies stating full capacity is under 6%.

I mentioned before that wider conditions bring a caution to being overly optimistic in the face of essentially pretty positive results, however the forecasts for these last two years have been broadly pretty accurate, always matching the sign of the gradient, if not the magnitude exactly.  These survey results indicate a net 45% of companies are forecasting increased output volume, made up of 58% increases, 14% decreases and 28% flat.   Assuming the forecast assumptions hold true, and with no measures to produce skilled resource overnight, projects to yield productivity gains become the best short term solution to keeping up with demand. In the longer term we will need investment both in human talent and in our productive capacity.

Longer term solutions have always driven discussions within Scottish Engineering, and in the last year the topic of how our sector increases and improves the diversity of individuals that we attract, retain and develop has been at the front.  The reasons for doing so are well understood in a sector struggling to attract the required level of talent, as are the benefits of diversity of thought that strengthen businesses as a direct result of improving any measure of diversity.  Through a series of working groups attended by volunteers from member companies, we have been refining our thinking about what Scottish Engineering should do to help its members with these pillars of attract, retain and develop.

One of the first steps identified was to add dedicated resource to the team to bring equality, diversity and inclusion expertise, plus the horsepower to continuously progress actions, and the search to fill this role will begin this month.

Another early action our volunteers directed follows a guiding principle of manufacturing:  if you can measure it, you can manage it, and so this quarter’s survey included questions that we can use to identify actions, then repeat the question and review to see if we are having the impact we seek.

In this survey we asked three questions relating to the key pillars, with the following results:

  • For Attract, we wanted to measure the range of diversity in applications for technical and engineering apprenticeships, knowing that to reflect society, gender balance alone should represent at least 50% applications from women. The average of estimates for all measures of diversity was just 12%
  • For Retain, our working groups reflected on existing evidence that shows that inclusive recruitment is key to turning interest (attract) into successful employment, and so we based a number of questions around that. Our findings showed that:
    • 62% would always consider reasonable adjustments (such as offering a role as part-time) to improve their probability of increasing diversity
    • 58% use clear guidelines for role description text in job adverts to ensure their recruitment is inclusive
    • 28% use a ‘blind’ selection process when evaluating CVs for next step evaluation
    • 19% have designed the review of their shortlisting process to eliminate conscious or unconscious bias
    • 13% have agreed targets for increasing diversity in their work teams
  • For Develop, the working groups again reflected on evidence that underlines the value of coaching and mentoring to develop employees who add diversity to an organisation, and here our survey reported that:
    • 11% have a formal coaching or mentoring programme open to all employees
    • 20% have a formal coaching or mentoring programme for specific groups of employees (early careers, workplace returners and other risk of retention employees)
    • 66% have no formal coaching or mentoring programme, but do operate an informal process to deliver this support

This data give us a benchmark against which we can measure progress going forward as we look to support our members with practical advice on attracting and retaining a diverse talent pool.

Paul Sheerin
Chief Executive
Scottish Engineering


Read the full Q1 2023 Quarterly Review