Chief Exec’s report Q4 2024
Read the full Q4 2024 Quarterly Review
3 minute read
Our final survey of the year makes for tough reading, and there is little sign of brighter times immediately ahead within it. It follows a more marginal but clearly concerning third quarter review and reflects the accelerated conversations we have had with industry over the last few months.
I don’t envy the task of any government faced with the financial challenges the UK faces, and who wouldn’t support actions to change the trajectory of what is now an eye watering debt ratio for the UK as a whole. The relevant question however is not if, but how, do you go about addressing that situation.
Industry has repeatedly said, please don’t think that you can shift that burden to employers without that impacting on their employees, and here the increases for National Insurance, National Living Wage and an absence of broader incentives to build business growth results in two outcomes. The first is that companies move to recovery mode as they look for the savings that will protect their business from these increases. That’s rarely a tactic that enables growth to be at the centre of the organisation’s focus, and those savings will likely impact employees in some shape or form. The second is that they impact that most critical but fragile of commodities – confidence – evidenced in this survey by the first time that our overall summation of optimism has turned negative for the first time in four years.
Despite confidence managing to remain above the line through the supply chain headaches in pandemic recovery, and an energy costs and general costs crisis following the invasion of Ukraine, that line has now been crossed and our focus now should be how we turn it around as quickly as possible.
It’s useful to look back at how these situations have played out in the past, and there are similarities in profile with last year where quarter three saw a mild decline in order intake, followed by a sharper fall in the fourth quarter, and you could say that so far this year has followed that pattern. A key difference however is that last year, the pipeline of existing or backlog of orders meant that capacity was still being stretched upwards, whereas this year as we see a reduction in capacity, meaning those costs and overheads will have to be absorbed on top of the budget increases announced.
The overall impact leads to a mismatch with the UK’s stated ambition: we want to grow the economy and by doing so create opportunity and wealth for society as a result. But the engine for that impact is employers, and the consequences of those actions – without questioning that some form of action is needed for the UK’s debt situation – seem at odds with the ambition that lies underneath.
One other aspect of this quarter’s survey was that based on continuing conversations with members, we were keen to review where companies now saw the balance of working from work compared to working from home. Anecdotally, this has felt like a changing perspective recently, with a theme that whilst a level of this balance has benefits in attracting and retaining staff, those upsides are countered by a decrease in effective communication, collaboration and teamworking. Companies point out that it’s particularly detrimental for training and onboarding new employees and disproportionately impacts less experienced staff.
The results of this survey showed that whilst the rate of return to a stronger balance of working from work has slowed in the last 18 months, it has continued on that trajectory. In May 2023, 43% of responding companies stated that they had increased their levels of working from work in the last twelve months, and now in this year to date, a further 19% of companies confirmed that they increased this balance, with a further 34% stating that they planned to review these arrangements in the coming year.
Whilst these figures tell a part of the picture, the comments that accompany responses are useful in understanding why companies are considering these changes, even though they recognise the risk they bring:
“Working from home may be something we need to accept in order to attract the required talent, however, it does not support a collaborative working environment especially for addressing problems in a timely manner, particularly for challenging “1st of type” projects”
“It’s unfair on shopfloor operatives and creates resentment… It’s not an ideal situation for a manufacturing company….”
“…although some employee tasks can be done working from home … for the manufacturing sector there are so many more benefits to having the employee at work as they then get involved in more discussions and generally have a better feel for what is going on in the overall business.”
The dilemma companies face between doing what’s best for their business whilst supporting their staff is maybe a good point to remind ourselves that flexible working is much more than just working from home, or the balance of that versus working from work. For instance, it also includes when people work with regard to start and finish times, shift patterns and days of work. The benefits for staff and business of flexible working need not be at odds with the company’s understandable desire to ensure effective teamworking.
Paul Sheerin
Chief Executive
Scottish Engineering
