If someone asked me to pick three words that characterise the sector I have spent my career working in, pragmatic would be a first pick, resilient a sure second, and probably purposeful would make the last spot. I can recognise the lack of sparkle in my picks, no wow factor there, and so back to some marketing classes for me. Maybe the word I would like to push its way in would be optimistic, despite that feeling at odds with the general direction of travel for business life right now.
The truth is it would be easy to see our glass as half-empty at present. The impact of Russia’s aggression against Ukraine has thoroughly upset a fragile energy market, with companies setting new energy contracts with three and four fold increases in costs that cannot be absorbed and so must be passed on to customers. The same Ukrainian steel plants that contributed to an already short supply of metals also produced as a by-product the high grade of neon gas used in the laser etch of silicon wafers. Semiconductors were already on the shortage list, and this latest blow is quoted as the most likely cause of further delays to new car production, and in truth its impact is much wider-ranging, impacting potentially anything with an electronic control unit.
Where demand is high and supply is low, prices climb steeply, true for every flavour of raw material, also increasingly true for people, especially those who are changing roles (where employers can find skilled staff to hire), and also in terms of pay settlements as businesses seek to offset inflationary increases for their staff and retain them at the same time.
Yet despite this rather despondent list, what we hear more often than not is optimism.
I heard a great phrase at a roundtable I attended this week, urging us all to re-brand the climate emergency as the climate opportunity, stating that an emergency is a cliff edge no one wants to jump off, whereas an opportunity is a Munro just waiting to be climbed. It tied nicely with the release of the Offshore Wind Industry Council’s intelligence report, forecasting the UK’s offshore wind workforce will more than treble by 2030 to just under 100,000 jobs, and average annual investment from now until 2030 of more than £17 billion.
Also in the last few weeks, the National Shipbuilding Office took time to come to Scotland to launch the National Shipbuilding Strategy refresh, outlining a program comprising of around 150 vessels over the next 30 years, with the capability of Scotland’s naval shipbuilding capacity well placed to compete for the cream of those assets.
The opportunity to couple expanded offshore wind energy generation with a hydrogen future that can maximise the existing skills and assets from our traditional energy sector continues to be developed at a pace, with a commitment of capital investment support for renewable hydrogen production included in the Scottish Government’s National Strategy for Economic Transformation.
These are examples of big-picture opportunities, and certainly a cause for longer-term optimism, but how do we explain the continuation of an upbeat outlook for most despite the known challenges?
Well, a healthy order book always helps, and we recently reported an impressive fifth straight quarter of positive order intake for our sector, with the next quarter forecast to continue that trend. Companies may be having a tough time accumulating the materials and skills to fulfil that demand, and the pricing of goods to maintain a profit may feel like a moving feast, but a good pipeline of demand goes a long way to settling nerves and bringing a focus to delivery.
Additionally, with geopolitical uncertainties and logistical constraints piling pressure on global supply chains, an increasing number of engineering and manufacturing businesses are seeking to “onshore” supply relationships, in other words bring business back to local Scottish or UK companies, and in some cases to bring production back “in house”. It would be premature to suggest that we are seeing a reversal of the gradual process of price-led global outsourcing which has been a consistent theme for the last 60 years, but the potential economic benefits for our productive economy and the supply chain and networks that underpin it cannot be overstated – not to mention the positive impact on sustainability.
Finally, to pick one of my dowdy descriptions, it is worth recognising the resilience of businesses in simply keeping going, always looking for solutions to challenges, constantly adapting and developing to survive and thrive despite the heavy weather that never seems to stop coming. This is the very essence of our time-honoured Scottish engineering ethos – solving problems, adapting, innovating to survive and prosper, and so delivering confidence in the long-term future for our sector.
Paul Sheerin is chief executive of Scottish Engineering
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