ENGINEERING in Scotland is heading for recession in the current quarter, the sector's industry body has warned.
Peter Hughes, chief executive of Scottish Engineering, told The Scotsman that engineering firms north of the Border had experienced a reduction in output for the past three months and were likely to do the same for the current quarter, planting the
m firmly in recession territory.
And he added that he did not expect the sector to recover until at least the beginning of 2010.
Scottish Engineering's latest quarterly report came as data from the Chartered Institute of Purchasing & Supply (Cips) revealed that the manufacturing sector had hit an "unprecedented" downturn, while the UK-wide Engineering Employers' Federation warned that tens of thousands of jobs in the sector were set to be axed.
Compounding the misery, new figures showed US factory activity falling to its weakest level since the 1981-82 recession and construction spending taking a dive, fanning fears of a protracted economic downturn.
Cips' purchasing managers' index dropped to 34.4 in November, the lowest reading since data was first collected in January 1992.
The rate of job losses accelerated sharply to a survey record, as companies initiated redundancy and workforce rationalisation programmes. Manufacturing accounts for about 14 per cent of Scotland's output.
Research released yesterday for EEF suggested that trading conditions would be among the toughest for 20 years. The group's chief economist, Steve Radley, said manufacturing was now heading for a recession as deep as that in the early 1990s.
In the report for the three months to November, Scottish Engineering said intake levels were in negative territory for the second consecutive quarter, while recruitment levels and output volumes had both fallen for the first time in five years.
But while output in large and small companies is falling, medium firms' production is remaining largely flat.
Hughes said that the engineering industry had remained largely immune to the global slowdown until September. He said: "In August and early September I was thinking 'what credit crunch?'. Then orders started to slow down."
He added that engineering firms which win a significant amount of business from overseas were being hit hard by the global aspect of the crisis.
He said: "It is all very well if the pound is weak against the euro and the dollar, but we are depending on them still having a demand. But it's a global recession and everybody is suffering from a lack of demand."
Hughes said he thought the sector would enter a technical recession at the end of the current quarter – which would continue until the end of 2009.
He said: "The most concerning thing is the speed in which it has come through."
The full article contains 454 words and appears in The Scotsman newspaper.
