Chief Exec’s report Q4 2023
Read the full Q4 2023 Quarterly Review
6 minute read
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. 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.
The key indicators when considered across industry don’t actually reflect a decline, and in fact there is a mild increase in order intake alongside output volume that is within a couple of percentage points of being static. Future forecasts and optimism are just about positive, but have dropped since last quarter, and this all contributes to an outlook for 2024 that feels like we are in somewhat of a holding pattern overall, and cautiously watching to see which way the new year will steer us.
Conversations are helpful at a company level, but in the round add little clarity. Companies aligned to construction have seen orders softening with most feeling an impact or are predicting that fall when current backlogs are fulfilled, and as a result fabricators and metal products carry the lowest levels of optimism for the next three months. Yet despite five out of six of our categories being either negative or flat for orders this quarter, four out of six register a positive score for optimism.
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.
If that all feels a little lacklustre and lacking in definitive direction, perhaps this is timely reminder that the release of this quarterly review coincides with the opening of COP28, the 28th United Nations Climate Change conference, being held at the Expo City, Dubai.
We have said before that after the intensity that we felt when COP26 was held in Scotland, it was always going to be difficult to judge if that was our own shortsighted view, or the inflation that the four-year big event naturally gets, but once again COP28 feels even quieter than last year’s event in its build up.
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. And whilst no-one is going to hand us the opportunity to manufacture those requirements on a plate, its sheer size and scale drives our ambition to capture as much as is reasonably possible.
For almost four years now, we have been asking members for their outlook on whether they see threat or opportunity from climate change, and in that time, we have seen an increase of 11% who see opportunity for their business, with that shift matched almost exactly by a reduction in those who see it as a threat.
However, in just twelve months, the ratio of companies who see an opportunity from addressing climate change has changed direction, falling by a couple of percent, and likewise companies pursuing operational or product/service design changes to support reduced climate impact have fallen by 7% and 5% respectively.
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. 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 it’s 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, internal combustion engine vehicles add to the lack of conviction that today’s commitments will be tomorrow’s plan.
Part of that frustration is that this lack of clarity feels at odds with initiatives that we welcome, such as the Advanced Manufacturing Plan recently released by the Department for Business and Trade, which aims to invest in the future of manufacturing across the UK through relevant investments such as delivering a competitive battery supply chain for the UK
For a government that says it wants the economy to grow its way out of the current cost of living crisis, for our sector, these inconsistencies, and the loss of confidence they bring, feels like an unhelpful way to help us contribute to that aim.
Paul Sheerin
Chief Executive
Scottish Engineering
