Read the full Q3 2025 Quarterly Review
5 minute read
The path to recovery hinted at in last quarter’s survey has continued, albeit in slower and smaller steps than any of us would like to see. It’s perhaps no surprise that a return to a more positive business outlook is progressing at this slower rate, given the depth of impact that last October’s budget changes to employment taxation had on the cost of doing business. The steady trickle of companies approaching or entering administration who have signalled these changes – often alongside high industrial energy costs – as significant in this outcome has been a painful reminder of their impact.
A marginal return to positive optimism is our best glimmer that better times for business lie ahead, supported by a significant step in forward forecast for our large and medium sized companies. The last few quarters have underlined however that forecasts are just that – a best estimate for the future but not reality until the orders arrive. Looking back to prior quarters this year, the gap between more favourable forecasts and negative optimism looks like a mismatch we should have questioned more, and in that respect a more upbeat forecast alongside positive optimism and an intent to increase staffing feels like a more joined up source of hope.
Last quarter we voiced our concern for planned investment in training, with small companies dipping negative in their intent to train for the first time in four and a half years. Although that number was ‘only’ a net -1%, we saw this as sharp change given that the average intent to train for this group since January 2021 has been above +26%. Whilst at times it may not feel like it, history tells us that downcycles always – eventually – turn to upcycles, and when we recently analysed the first quarter of this century, the split was a decent two thirds positive to one third negative.
In the context of training investment, this quarter’s decent uptick is both welcome and essential. Downcycles mask the extent of skills shortages and given many areas of industry are already constrained by a lack of available skills, the inevitable pick up when it comes will focus our attention once again on how acute that problem is.
As a topic of concern that is always at or near the top, and given this survey coincides with the time of year our new cohort of modern apprentices start across Scotland, we asked our members some specific questions in this survey on apprenticeships.
Our first ask was on demand, seeking to understand the ratio of people applying compared to the number of roles available. Across all companies, and the majority small and medium enterprises, for every role advertised there were an average of seventeen applicants, and when considering larger companies only with stronger recognition and role promotion that ratio doubled to thirty-five applicants for each role advertised. We still aim for a stronger balance of gender in those applicants, but overall, that’s a very healthy attraction rate, and so for engineering skills issues, this is not the problem.
The next ask was for companies to identify where a lack of Scottish Government budget for apprenticeships at their College or Group Training Association resulted in their inability to start an apprenticeship when they wished to do so, and here twelve percent of companies reported that they encountered this issue. For engineering skills issues, this is a significant part of the problem.
We endeavoured to understand if capacity in businesses is an issue where they are unable to train additional apprentices as they do not have the capacity in our core workforce to train more than they currently do. Only twenty percent of our member companies stated that they had hit their maximum capacity to train, and so here for engineering skills issues, this is not the problem.
Finally, when asked what the single most important issue stopping businesses from increasing their training output, sixty percent of companies identified the financial burden of funding the four plus years of investment – at an average of over £100k per apprentice – as the critical issue. Companies taking this commitment do so with no guarantees that the trainee can or will complete the training successfully, or in fact remain with the business on completion. For engineering skills issues, this is a significant part of the problem.
At the risk of once again sounding like the broken record (that I am) for this topic, the relevant post school skills reform bill proposed by the Minister for Skills and currently working its way through the Scottish Parliament contains nothing that will address these fundamental problems. For a process that has been running for two years and will likely run – assuming it gets passed – for the same time and more, that’s a long time to leave these unattended.
In light of this, we are grateful for the Deputy First Minster’s attention to the potential impacts on Scotland’s economy – positive and negative – for this issue and so welcome her genuine engagement – whilst we have her – with our sector for potential solutions for this challenge.
Paul Sheerin
Chief Executive
Scottish Engineering
