HUGH Aitken, director of the Confederation of British Industry in Scotland, is to be commended for endeavouring to find the positives in his organisation’s latest survey of manufacturing sector activity north of the Border.
He focused on continuing robust growth in new export orders for Scottish manufacturers – something that appears to be in no small part the result of sterling’s woes since the Brexit vote last year.
However, the survey also shows Scottish manufacturers recorded overall falls in output volumes, new domestic orders and employment in the three months to October. All of these indicators had shown sharp rises in the previous three months.
Lamentably, the survey also shows sharp drops in planned investment by manufacturers north of the Border over the next 12 months in buildings, plant and machinery, product and process innovation, and training and retraining.
This is perhaps the most telling aspect of the survey, in terms of providing an insight into the backdrop against which Scottish manufacturers are operating.
Yes, the Brexit vote has led to a decline in sterling and boosted new export orders. But this fall in the pound reflects financial markets’ view that the UK’s economic outlook has deteriorated significantly.
Nothing we have seen from the UK Government in the Brexit negotiations so far would cast doubt on this assessment by financial markets. Rather, the ongoing shambles supports the belief that the UK’s prospects are diminished as a result of the planned exit from the European Union.
Given this difficult outlook, and the huge uncertainty created by the Brexit vote, it is no surprise Scottish manufacturers are reining in investment.
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