The East Kilbride plant overhauls aircraft engines

However, the Scottish Engineering quarterly review also shows more investment and a rise in staff levels.

The electronics sector was hit badly, with 69% reporting a decline in orders in the past three months.

Margins remained under severe pressure during the period, due to "significant rises" in costs, the survey said.

Raw materials

Peter Hughes, chief executive of Scottish Engineering, said that it was "disappointing" to see the electronics sector dropping back so significantly, particularly following three positive quarters.

He said: "The sector has bounced back from severe downturns in recent years, so we can only hope this is a temporary setback for such a vital area of our Scottish economy."

Mr Hughes said that profit margins had been held down by increases in charges of raw materials, the rising cost of utilities such as water and electricity, and fuel prices.

However, the chief executive believed the manufacturing engineering industry was displaying "great resilience" in the face of mounting costs.

This flags up to me that Scotland's manufacturing engineering sector is continuing to maintain its position as a world player Peter Hughes Scottish Engineering

The level of optimism within the industry maintained its positive position for the third consecutive quarter for the first time since 1999.

Capital investment plans were found to be up for the second consecutive quarter - also for the first time in five years.

"This flags up to me that Scotland's manufacturing engineering sector is continuing to maintain its position as a world player," Mr Hughes said.

Staffing levels were also positive, according to the review, with companies which had seen the number of employees rise outnumbering those shedding jobs.

'Competing options'

Mr Hughes also praised Rolls-Royce's decision to retain its aero-engine repair and overhaul facility in Scotland.

The engineering giant showed last month it was bucking the manufacturing exodus from the UK, with a new �45m factory in East Kilbride, Lanarkshire, that should safeguard more than 1,000 jobs.