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With engineering orders at a near 30-year high, is growth sustainable?

by Heat Recruitment

Brexit is undoubtedly one of the most divisive political issues in living memory. From it, however, one conclusion can be drawn with certainty – the weak pound (GBP) has driven manufacturing orders to heights not seen in nearly 30 years.

Indeed, manufacturing orders have now reached a peak not seen since 1988. Around 28% of British firms have reported order volumes “above normal” – compared with just 11% citing below average orders, with an overall balance equating to 17%.

This growth is undoubtedly a positive – it translates into more demand for services and indeed a greater number of opportunities for those working within the industry. Long-term, however, the development of a sector based on low GBP values is unsustainable – it’s the equivalent of a retail-based store selling its stock at a discount. What happens when said organisations need to resupply?

In short, the UK’s engineering sector would seem to be performing through currently held inventory, as well as staff already within the sector. On sourcing new materials for the creation of new goods, however, the reduced purchasing power behind GBP will prove less of a boon.

One avenue that has been identified is to ‘Buy British’ – sourcing materials internally would indeed sidestep the lower valued currency. Unfortunately, due to globalisation and the associated specialism that membership from the EU has brought, the UK simply does not produce the variety of raw materials necessary to support this strategy in the long term.

The solution, then, lies with increasing overall productivity. Currently, the UK is outperforming its EU competitors in terms of output – but the issue comes from the amount of resource that is required to achieve this. With the UK now ranking among the lowest of its G7 neighbours in terms of productivity, bridging this gap may well prove key to meeting the gap this shortfall will cause in the long term.

The skills shortage is the clear barrier in the way of solving this issue. Without the right talent in place to drive forward with new projects, the integration of automation technology and data analytic suites among them, any efforts to progress will inevitably stall. According to an IHS/Markit report in December, permanent placements are rising at their fastest rate since August – particularly in areas of the UK known as manufacturing and engineering strongholds.

A potential reason for this shift is the aforementioned lack of skilled talent. In months past, we have seen a trend pointing to the increased utilisation of temporary staff – with workers taking on projects on an ad hoc basis. The disadvantage of this approach is that as the need for staff rises, their time will be increasingly spent on projects for other companies. Firms are now realising the value of talent that is contractually linked to their specific organisation… long-term success for them, and fewer skilled staff for their competitors.

This lack of skilled talent, however, makes competition for candidates an even greater challenge than ever before. To ensure success, and indeed to bring the best employees to your engineering or manufacturing firm, partnering with industry specialists will be essential.

If you’re looking for your next career move in this sector, we have created our Ultimate Guide to Engineering Roles. At Heat Recruitment, we help link employers with the latest legal talent. Get in touch. We’re here to help.

By Mike Taylor