Chief Exec’s report Q2 2025
Read the full Q2 2025 Quarterly Review
3 minute read
This quarter’s survey shows a welcome step in the right direction, but it would be a stretch to herald it as a solid path to recovery. More balanced in optimism vs caution might be the more accurate description, and as ever it’s important to reflect that the responses show a mix of experiences for our companies from the more positive through to the more challenging in terms of trading conditions. Our survey was conducted as the impact from the UK Government’s autumn budget arrived, landing the significant challenges that have been anticipated since last October, in particular around the costs of employing staff.
It is true that international jitters around tariff policies, borrowing costs, and geo-politics have played a key role in a downbeat and uncertain global economic setting which undoubtedly affects many businesses in our sector. It has, however, been said by many, and worth repeating here, just how far off-course from the stated ambition of growing our economy these domestic policy changes take us. Orders and output are obvious indicators of the challenges, but perhaps two metrics in our survey that are usually less visible underline the specific impacts.
The first of those is staffing intent, negative again for the third quarter in a row, this time at its highest negative rate of all three. This result is driven by our small company’s group, where the cash impact of the budget changes demands an urgent response to ensure businesses remain sustainable.
The second to highlight is investment in training, with small companies dipping negative in their intent to train for the first time in four and a half years. The recorded number is a net -1%, so I could hear an argument not to overreact to this fall, but this is actually a starker change than it first appears. The average intent to train for this group since January 2021 was just above +26%, and just last quarter remained at +18%. It’s not hard to see that against the need to balance the books, every spend must be looked at, even where short term savings may be detrimental to the long term health of a business, and more broadly the long-term health of our economy.
It might be reasonable to say that financial black holes need to be covered somehow, and whilst industry would offer plenty of alternatives to the deeply damaging path chosen, we are where we are. Surely now, however, we need that oft quoted “laser focus” to return to the promise to grow the economy? Without that growth all other political objectives, social and economic, are in jeopardy.
Against that wish, and from an economic point of view, I found the UK Government’s latest pronouncements on immigration disappointing. Whilst I recognise that this is a contentious political issue across the UK for a whole range of reasons, in engineering and manufacturing in Scotland the reality is that immigration is a vital source of skills and experience that cannot be replaced overnight. These skills levels take years to build – and we should be building them – but closing off the supply before putting in place the actions to do that is another example of an action that will challenge the stated ambition of growing our economy.
Elements of the proposals will hit engineering particularly hard. Raising minimum qualification levels from Higher equivalents to Degree level would leave out the skilled trades and crafts roles where we are already in shortest supply: welders, fabricators, electricians, pipefitters, CNC machinists to name a few. The shortening of the Graduate visa scheme reducing the right to work from two years to eighteen months after graduating will not only hit our education sector but also reduce the attractiveness of the scheme for companies who will have a shorter timeline to decide whether to invest in the process to extend the visa of the employee.
Much has been said about the tone and language of the announcement, and you will have your own view of that. In consideration of the impact on business, companies have reminded me that for skills, like any other commodity in demand, the holder of the asset has choices, and therefore we – Scotland and the wider UK – are in competition with countries around the globe. So, when we make statements that feel less than welcoming, we detrimentally impact the ability for our companies to compete to attract those skills, and so support our goal to grow our economy.
A last frustration for me on this topic is that whereas there is considerable detail on how we plan to restrict and close this supply of skills, on the laudable stated aim that we will replace the loss with trained or upskilled UK born workers, the detail is missing on how that will be achieved. And there is no detail that recognises that engineering skills take between four and six years to get to a starting level of competency. It does not seem an unreasonable request for the get-well plan to carry at least the same level of detail as the take-it-away plan.
Paul Sheerin
Chief Executive
Scottish Engineering
