Benefits yet to be realised
Scots factories failing to share in ‘Brexit bounce’
Scotland’s factories do not appear to have shared in the Brexit bounce reported elsewhere in the UK economy.
British manufacturing staged one of its sharpest rebounds on record in August, a post-Brexit surprise that could prompt the Bank of England to rethink the need to cut interest rates again.
But new figures today from Scottish Engineering, the trade body for manufacturers north of the border, showed a downturn in orders output and even employment numbers. It blamed the Brexit vote and continued speculation around a second independence referendum.
It said “circumstances outwith the control of the Scottish economy”, particularly the fall in sterling against the euro and dollar, have added to import costs.
The SE survey for the third quarter was in marked contrast to the upbeat Markit/CIPS Purchasing Managers Index which surprised economists and gave a strong signal that Britain’s economy is performing better than initially feared after the referendum vote to leave the European Union.
Sterling soared by more than a cent against the dollar and if sustained may help Scottish importers.
Manufacturing only makes up about 10% of Britain’s economy but if the service sector PMI, due on Monday, shows the same trend, it would prompt a rethink among many economists about the short-term Brexit hit to Britain.
The EEF trade body said firms “appear to have their mojo back in August” but added the figures probably exaggerated the sector’s true strength and would weaken.
But Bryan Buchan, chief executive of SE was gloomier about the outlook in Scotland. He said: “We appear to have been hit on all fronts. The potential benefits of a weaker pound for exports have yet to be realised and our figures show there has been substantial downturn in export orders.
“At the same time, we have seen a significant rise in commodity prices, notably metals including nickel and zinc which is impacting directly on companies involved in fabrication and galvanising in particular.”
Order levels have been negative for eight consecutive quarters and have only been worse during the global slump of 2009.
Output volumes (21%up, 31%same, 48%down) are also at their lowest level since 2009. Staffng levels which have tended to be less volatile of late have dipped considerably (20%up, 51%same, 29%down).
Mr Buchan hopes that the Bank of England’s recent package will promote some improvement.
“But we now look to our new Chancellor Philip Hammond, to step in with further measures to defend our economy,” he said.