SCOTTISH manufacturers enjoyed a sharp rebound in output in the latest three months, although the pace of increase of new orders slowed, a key survey has revealed.

The survey, published by the Confederation of British Industry in Scotland, also signalled a further significant increase in numbers employed in the manufacturing sector north of the Border in the latest three months.

However, it continued to show that Scottish manufacturers expect to cut capital expenditure on buildings and on plant and machinery on a 12-month view.

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CBI Scotland director Iain McMillan described the overall picture painted by the survey as "encouraging". However, he also highlighted cost pressures on manufacturers, and weak investment intentions.

Subtracting the proportion experiencing a fall from that achieving a rise, a balance of 25% of Scottish manufacturers reported an increase in output volumes in the latest three months. In CBI Scotland's previous quarterly survey, a net 7% reported a fall in output volumes, so the latest reading signals a turnaround.

A balance of 6% of Scottish manufacturers reported a rise in total new orders, in volume terms, in the latest three months. This signalled a slowing of growth in overall new orders, with a balance of 15% having reported a rise in the previous survey.

The balance of firms reporting an increase in new export order volumes slipped to 9%, from 16% in the previous survey, also signalling slowing growth.

However, the balance of Scottish manufacturers reporting a rise in domestic order volumes improved to 11% from 7%.

A net 16% of respondents increased numbers employed in the latest three months. This matched the balance in the previous quarterly survey.

Meanwhile, a balance of 12% of Scottish manufacturers reported an increase in optimism regarding the business situation over the latest three months. And a net 17% expressed increased optimism about export prospects for the year ahead.

Mr McMillan said: "The past quarter has seen ­Scottish industry report a slight increase in order books and confidence. The overall picture remains encouraging."

However, he added: "High costs continue to pose a threat and investment intentions remain weak. Scottish industry needs to fight hard for every sale, and companies need to ensure that they are internationally competitive. Policy-makers at all levels can assist by keeping down costs which affect firms and by making it as easy as possible for firms to invest and export."