Scotland's manufacturing sector appears stuck in a holding pattern with a number of organisations that previously felt there was an opportunity to address climate change no longer as confident in the notion.

The latest quarterly review of the sector from Scottish Engineering notes that over the past year the ratio of companies that see an opportunity to address climate change has fallen by a couple of percentage points. This is a reversal of the previous trend with an 11% increase in those who viewed climate change as an opportunity and an almost identical reduction in those which described it as a threat.

Likewise, the number of companies pursuing operational changes or alterations to their products and services to support reduced climate impact has fallen by 7% and 5% respectively.

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Noting that the release of today's report coincides with the opening of the COP28 climate conference being held in Dubai, Scottish Engineering chief executive Paul Sheering said the lack of clarity from government has led to confusion across the market.

"It’s hard not to draw a parallel between our own UK government’s flip-flopping approach to climate actions in the last year, and the resulting dip in commitment from our engineering sector trying to chart their own course to survive and thrive in uncertain times," Mr Sheerin said.

"As an example, the removal of confidence to investment caused by the Contract for Difference (CfD) round that was predicted to strike out even before its launch is the opposite of what industry needs to get behind and make the most of what remains a massive opportunity. Changes to planned timing for phase outs for gas boilers [and] internal combustion engine vehicles add to the lack of conviction that today’s commitments will be tomorrow’s plan."

He added: "For our sector, understanding the expected pace that our infrastructure will have to change as we transition from our current energy supply model to a renewables future is critical to allow companies to look ahead for their own diversification planning."

As for the overall economic outlook, the readings were generally flat.

There was a mild increase in order intake along with output volumes that was within a couple of percentage points of being static. Optimism was just about positive but fell since the last quarter.

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Companies aligned to construction reported a softening in orders with most either already feeling an impact or predicting that fall will occur when current backlogs are fulfilled. As a result fabricators and metal products firms are among the least optimistic about their prospects for the coming three months.

Yet despite five out of six subsectors being either negative or flat for orders this quarter, four out of six registered a positive score for optimism.

"Last quarter we asked the question of whether the UK’s rising interest rate had brought a lasting negative impact, or more hopefully if this was just a temporary dip," Mr Sheering said. "The conversations with members since have definitely erred towards the side of caution, and in reviewing our year end survey responses the word that jumps out is perhaps the one that also best describes the Scottish and UK economies: flat."

He added: "With movements in the metrics being marginal, accepting a neutral outlook along with patience to get a clearer read on where we are heading feels like our most rational conclusion for now," Mr Sheerin said.