There are official statistics about the Scottish economy. There are regular academic reports on the different sectors. And then there is the CBI’s Scottish Industrial Trends Survey.
The last has been a remarkably accurate barometer of this country’s economic health. It doesn’t pretend to be comprehensive, it isn’t subject to revision, and it looks forward as well as back.
The publication of the latest survey this morning provides evidence of a continuing revival in the manufacturing sector. The results show improving trends across the board over the past three months, with firms reporting increased domestic and export orders. Domestic orders beat exports for the first time in 12 months and recorded their strongest performance for five years.
Looking forward, firms expect this to continue over the next three months, although most believe that their average unit costs will continue to rise, albeit more slowly than in the previous quarter. They report that their confidence remains broadly flat, but their optimism over exports for the year ahead has improved strongly.
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Significantly, there are clear signs that Scotland’s manufacturing companies are starting to hire extra people. More firms expect to authorise greater levels of investment in product and process innovation and in training over the next 12 months, something many of them haven’t been able to do since the start of the recession. According to Iain McMillan, director of CBI Scotland, “This solid set of results suggests that the revival in Scottish manufacturing witnessed of late is becoming more entrenched, despite the recent spike in input costs. This will be crucial if Scotland is to strike a more sustainable economic model, becoming less reliant on public spending and with a far greater emphasis on private sector growth.” The survey’s positive findings come as something of a relief, following the publication of the Scottish government’s economic figures for the final quarter of last year. They show that, at that time, manufacturing was in dire straits, although the economy as a whole performed marginally better than the rest of the UK – gross domestic product (GDP) falling by 0.4 per cent compared with 0.5 per cent for GB plc. The fourth-quarter GDP figures are a little better than many commentators had feared. The various economic surveys had suggested that the fall in output north of the border would be much steeper than elsewhere in the UK. In the event, the Scottish economy grew by just 0.8 per cent in 2010, just over half the UK’s 1.4 per cent growth. However, looking at last year as a whole, the figures still make grim reading. Part of the problem is that banks and other financial service companies were haemorrhaging jobs and output for that sector dropped sharply. Scotland’s manufacturing sector was particularly disappointing, with output growing by only 1 per cent last year. This contrasts with the 3.6 per cent increase throughout the UK. It makes today’s survey from the CBI all the more encouraging. Iain McMillan acknowledged that the official statistics mirrored the Scottish industrial trends survey covering that period, which was disappointing with optimism having cooled and contractions in orders and output. “The very poor weather in late November and December had a significant negative effect on the economy at the end of last year," he added, "as evidenced by the particular falls in construction and logistics.” Mr McMillan argues that “the recovery from recession was always likely to be bumpy, which makes it all the more important that the next Scottish government prioritises policies which promote trade, business investment and commercial innovation.” On this, the CBI and the Scottish TUC may well be proposing similar ideas. In its recent discussion paper – The Future of Manufacturing Industry in Scotland – the STUC argued that “low tech manufacturing sectors must not be ignored and investment needs to step up if a rejuvenated manufacturing sector in Scotland is to lead the country’s economic recovery. The paper points out that sectors such as food and drink continue to employ far more people than those in high tech. But it also wants more of the revenues from Scottish research and development, and from innovation, to be retained here. It says that an industrial strategy is needed, based on passive measures like tax breaks for research and development and effectively rationed grants. Grahame Smith, the STUC general secretary, believes there is a growing consensus among politicians “across the spectrum” over the need to refocus the economy, with a greater emphasis on manufacturing. “It is essential that the opportunity provided by this emerging consensus is grasped,” he says. “The STUC will urge the new Scottish government to work with partners to develop a modern industrial strategy for Scotland,” he goes on to say, adding that a number of “key issues” have to be addressed. “These include the provision of the patient and committed finance of which Scottish manufacturing firms have been starved. It is absolutely vital that finance is reformed in order that it supports, rather than undermines, the productive economy.”Want to discuss other issues? Join the debate on our new Scottish Voices forum
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