‘Resilient’ Scottish manufacturers see optimism improve

● Output slows in three months to July but sector forecasts pick-up next quarter

Scottish manufacturing sector is holding its own amid political and economic turbulence despite slowing growth, new research suggests.

Output growth eased “significantly” in the three months to July at +4 per cent, down from +17 per cent in the previous quarter, according to the latest CBI Industrial Trends Survey for Scotland.

Thecbipointedtothe“looming” Brexit deadline, as stocks of finished goods rocketed to +16 per cent in the quarter, from -2 per cent in April, marking their fastest rate of growth since 2013. The proportion of firms working below capacity also increased markedly, soaring to 52 per cent from 28 per cent in April.

However, manufacturers in Scotland remained upbeat, as optimism improved from +1 to +8, going against the Uk-wide results that saw sentiment plummet.

Total new orders continued to grow at an above-average pace, with a boost in exports partly offsetting a dip in domestic business.

The sector forecast a significant pick-up in output over the coming quarter, on a balance of +28 per cent, anticipating further overseas demand.

Scots firms also predicted a similar jump in headcount, after employee numbers eased by 5 percentage points in the quarter to +9 per cent.

The picture for investment remained mixed, with firms scaling back funds for buildings and training, but seeking to invest more in innovation plus plants and machinery.

Worries over raising external finance (24 per cent) and its cost (25 per cent) reached record highs.

Tracy Black, CBI Scotland director, said: “With the October Brexit deadline looming, it’s not surprising to see a bit of a lull in activity as manufacturers brace themselves for further political wrangling and continued economic uncertainty.

“While it’s great to see that firms remain upbeat, particuthe larly about exports, just think where we’d be with a good deal secured and the prospect of no deal firmly off the table.

“With Scotland still suffering from a substantial skills gap and firms beginning to recognise the need to prepare for automation and technological change, [businesses] need to be able to have the right incentives to invest in the training and upskilling of their employees..”

The CBI’S Uk-wide survey showed that orders, employment, investment, output and business optimism all deteriorated at a national level.

Chief economist Rain Newton-smith pointed to a “double-blow” of Brexit uncertainty and slower global growth amid lingering trade tensions.

She added: “As the tailwind from stockpiling weakens, clouds are gathering above the manufacturing sector.”

Speaking before the announcement of Boris Johnson as the next prime minister, Newton-smith called for the securing of a Brexit deal ahead of the October deadline, as well as, say, improving infrastructure and fixing the apprenticeship levy.”