Low oil prices and a strong pound have combined to drive down orders, output and head counts among Scottish engineering firms in the past three months, a new survey shows.
Industry support and training group Scottish Engineering (SE) said its latest quarterly report continued a depressing trend set earlier in the year.
Nearly half of SE members who took part in the poll said the number of orders they received in the past quarter had gone down, compared to one in four who had secured more work.
But companies expected the pace of the slide to slow down in the home market in the next quarter, with just under 30% saying their orders were likely to dip.
A third of companies said staffing levels had dropped during the past three months, against a quarter who took on more employees than they laid off.
Output dropped at 44% of firms, while only one-fifth stepped up production.
SE’s surveys throughout the year have also revealed a lack of optimism across all sectors.
Two-fifths of engineering firms said optimism was on the wane in the last quarter, but only 23% said the mood had picked up in the workplace.
SE chief executive Bryan Buchan has spotted a slight break in the clouds, however.
Mr Buchan said many of the organisations’ members in niche markets were faring well, as were bigger companies who could still make a profit from exports, despite the exchange rate.
Job losses in the oil and gas sector have helped ease longstanding skills shortages, though the benefits of this shift have mostly been restricted to the central belt, he said.
Jim Milne, chairman and managing director at Aberdeen firm Balmoral Group, said 2015 had been tough for the sector, particularly in the north-east, and next year would be more difficult.
But Mr Milne also said the oil price slump has had some positive effects, in that it has forced firms to focus on streamlining for the future.
He added: “We are fortunate – being a private company – that we can adapt to market conditions quickly. We actively monitor the market and take steps to mitigate any change in circumstances to prevent reactive and detrimental actions taking place wherever possible.
“We have had a steady year but it is undoubtedly going to be tougher in 2016 and perhaps beyond.”
Andy Hall, who became a director of Inverness-based 4c Technology last year, said it was a difficult time to get a fledgling company up and running as negative vibes prevailed throughout the energy sector.
But 4c, which primarily focuses on the marine renewables market, still sees plenty of opportunities to secure Scottish Government deals.
The company is gearing up to start work on a £300,000 contract early next year.
Mr Hall said: “If you’ve got the right products and services, you’ve got a chance. Companies are looking to change suppliers.
“If you’re an existing supplier, then that’s not so good but if you are looking to disrupt and get in there, it’s good for you.”