SCOTTISH manufacturers suffered an accelerating drop in new orders in the latest three months, with export business falling sharply, a key survey has shown.
The CBI’s latest industrial trends survey shows that manufacturers north of the Border experienced their sharpest overall drop in new export order volumes since mid-2009 in the three months to July, having enjoyed a surge in the preceding three months.
Scottish manufacturers’ total new order volumes fell at the fastest pace since January 2013, according to the survey, although the rate of decline in their overall output volumes slowed sharply in the three months to July.
According to the survey, employment in the Scottish manufacturing sector increased again, albeit at a slower pace than in the preceding three months.
The CBI’s quarterly monitor is significantly more downbeat than Scottish Chambers of Commerce’s findings for the manufacturing sector in its latest economic survey published last week.
Scottish Chambers’ survey signalled strong rises in total orders, profits and employment for the manufacturing sector north of the Border in the second quarter. It also indicated that Scottish manufacturers were faring well on the export front.
The CBI survey shows that, subtracting the percentage reporting a rise from that experiencing a fall, a balance of 20 per cent of Scottish manufacturers posted a drop in total new orders for the three months to July.
This marks a significant deterioration from the preceding three months, during which a balance of seven per cent of Scottish manufacturers experienced a fall in total new orders, and signals the fastest pace of decline since January 2013.
Meanwhile, a balance of 21 per cent of Scottish manufacturers reported a fall in new export orders for the three months to July. This reading is the worst since July 2009 and contrasts with that for the three months to April, during which a net 50 per cent of firms achieved an increase in incoming export business.
In the three months to July, 33 per cent of Scottish manufacturers reported a fall in new export orders and only 12 per cent achieved a rise.
The CBI cited the impact of the strong pound on Scottish manufacturers’ competitiveness in overseas markets, particularly those in the European Union.
The business organisation also found the wider UK manufacturing sector is predicting a fall in new export orders in the coming three months.
CBI Scotland director Hugh Aitken said: “Manufacturers across the UK are under pressure from the stronger pound, which is knocking their export competitiveness in the EU particularly.
“Greater buoyancy in exports remains a missing element from the UK’s recovery and we would urge the Scottish Government to continue to look at ways to support exporters, particularly small and medium-sized firms, to break into new markets.”
He added: “Trade missions, like the First Minister’s visit to China, are an important way of promoting Scotland’s sought-after products and services around the world.”
A balance of two per cent of Scottish manufacturers reported a fall in output volumes in the three months to July. This was a significant improvement on a balance of 20 per cent reporting a drop in output during the preceding three months.
Meanwhile, a net five per cent of Scottish manufacturers increased employment during the three months to July. This signals a slower rate of increase of overall staffing than the balance of 10 per cent reporting a rise in employment during the preceding three months.
The CBI survey meanwhile signals that Scottish manufacturers expect to reduce significantly their capital expenditure on plant and machinery, and buildings in the coming 12 months. It also shows that they intend to cut spending on product and process innovation, and on training over this timeframe.
And Scottish manufacturers are predicting falls in total new orders, incoming domestic and export business, output volumes, and numbers employed in the coming three months.
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