By Ian McConnell

Business Editor

Scottish manufacturers fear a renewed tumble in output volumes and sharp declines in domestic and export orders in the next three months, and have experienced a steeper drop in employment, a key survey signals.

The survey, published yesterday by the Confederation of British Industry in Scotland, indicates manufacturers north of the Border achieved a marginal rise in output volumes in the three months to January. This followed significant declines in each of the three previous quarters.

Subtracting the proportion experiencing a fall from that posting a rise, a net 1% of Scottish manufacturers reported an increase in output volumes for the three months to January.

In the three months to October, a balance of 13% had recorded a drop in output volumes. A net 71% had reported a decline in output for the three months to July.

Looking ahead, a balance of 41% of Scottish manufacturers expect a decline in output volumes in the coming three months.

Meanwhile, respective balances of 37% and 44% expect declines over the next three months in domestic and export order volumes.

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These would be steeper drops than in the three months to January, a period for which falls in domestic and export orders were reported by respective balances of 18% and 14% of Scottish manufacturers.

In the three months to January, a balance of 35% of manufacturers north of the Border recorded a decline in employment. A net 24% had reported a fall in numbers employed for the preceding three months. Scottish manufacturers have now reported a fall in employment for four consecutive quarters.

CBI Scotland noted cost pressures had “ramped up sharply” in the three months to January, “putting real pressure” on profit margins.

It added that growth in average unit costs was expected to pick up even further in the next three months, with expectations of such increases at their highest since April 2013.

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CBI Scotland director Tracy Black said: “With vaccine approval news being offset by another nationwide lockdown in Scotland, this survey seems to have bucked the trend seen over much of 2020, with a broad stabilisation in activity across the sector. But the fact that firms are feeling pessimistic about the immediate future reflects a sense of hopes dashed, and the need to brace for more tough months ahead.

“Cost pressures and evaporating demand mean that the Scottish and UK governments need to avoid tapering off business support and ensure that existing resources get to firms that need them as quickly as possible. Extending the successful job retention scheme until the end of June would be a huge relief and go some way to protecting jobs and livelihoods.”

Scottish manufacturers’ investment intentions have turned positive. They predict investment in the next 12 months will be higher than in the prior year in buildings, plant and machinery, product and process innovation, and training.