CBI Scotland survey

Output growth aided by strong exports

Tracy Black

CBI Scotland’s Tracy Black says Scottish businesses are not maximising their export potential

Scottish manufacturing firms reported that the pace of output growth picked up in the three months to January.

Growth in export orders and deliveries were the strongest since April 2015, according to the CBI’s latest Industrial Trends Survey for Scotland.

The survey of Scottish manufacturers found that growth in domestic orders also accelerated over the same period, up an encouraging 34%.

Meanwhile, employment grew robustly by 25% after deteriorating in the previous quarter to October (-6%).

However, average unit costs growth rose to the strongest in a year, rising 35% which drove a pick-up in both domestic (+13%) and export (+15%) price growth.

Looking ahead, expectations were more pessimistic across the board.

Scottish firms involved in the survey anticipate that new orders growth will ease over the next three months, with only a slight rise in export orders expected and domestic orders set to stay broadly unchanged.

Tracy Black, CBI Scotland Director, said: “Manufacturing remains a key sector for the Scottish economy and solid growth will be warmly welcomed. But expectations for orders growth are softer and some investment plans are looking weak.

“Furthermore, these results come against the background of some concerning GDP figures for the Scottish economy.

“Growth is still worryingly low and not only do we continue to run behind the UK as a whole, there is little sign of breaking free from a persistent cycle of fragile growth.”

Business optimism about export prospects for the coming 12 months continued to improve but at a slower pace than the preceding quarter, despite the strong exporting performance in the three months to January.

However, optimism about the business situation more broadly improved at a quicker pace.

Average unit cost growth rose 35% and is expected to remain elevated, with expectations the strongest since April 2013. Export prices are set to grow at a similar pace while domestic prices are set to rise at a faster rate, with expectations also the strongest since 2013.

Investment plans for the following 12 months deteriorated further for plant and machinery (-45%) and innovation (-29%), where manufacturers expect to cut back on investment to the greatest extent since April 2012. Firms expect to spend less on buildings investment (-34%) and training (-13%),

Addressing the challenges ahead, Ms Black said: “Internationalisation is a vital driver of both economic and productivity growth and is one of four areas we’ll be looking to address in the coming year.

“Scotland has lots of companies with huge exporting potential that aren’t currently taking advantage of overseas markets – we need a better understanding of what’s holding them back and what we can do to help overcome any barriers.”

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