Manufacturers in Scotland are optimistic about prospects for growth in the coming year, despite experiencing increasing difficulty in recruiting workers with relevant skills and a significant drop in the number of businesses currently exporting, which fell from 50% in 2016 to 36% in 2017.
Of Scottish firms responding to the latest manufacturing and engineering survey conducted by Henderson Loggie, in conjunction with the MHA association of UK independent accountancy firms and Bank of Scotland, 65% (60% in 2016) are predicting growth over the next twelve months, anticipating it to come from increased demand from customers, expansion of product offering and currency appreciation. Of those surveyed 45% achieved growth in some form last year.
Although 45% (57% UK) of businesses expect staff numbers to increase in the next twelve months, the survey shows that 72% of respondents have difficulty recruiting employees with the relevant skills, with 17% citing a lack of motivated applicants locally for lower skilled roles as a key issue.
When asked about the Brexit effect, only 22% (16% UK) cited Brexit concerns and uncertainty over future trading tariffs as a barrier to growth. Two years ago the same survey revealed that Scottish manufacturers were overwhelmingly in favour of the UK remaining a member of the European Union, with only 4% (10% UK) of respondents believing it would benefit British business and the economy to leave the EU. Despite the “leave” vote not being favoured by the sector, a large number do not appear to be overly concerned by the impact of Brexit, again highlighting the resilient approach to dealing with uncertainty.
Commenting on the report, Gavin Black, manufacturing lead at Henderson Loggie, said:
“Scottish manufacturers are largely positive in their outlook and prospects for growth, and the sector is certainly gritting its teeth in what has been a difficult and uncertain period. However, we should not be complacent and the survey has found that despite the ambitions, growth is being constrained and companies in the sector continue to be under increasing pressure to cut costs, meet the rising prices of raw materials and embrace new technologies if they are to survive.
“The sector continues to have difficulty recruiting staff with the relevant skills, the pressure on which is likely to increase as some businesses are at risk of losing staff due to Brexit. It is encouraging that the businesses surveyed have ambitions to grow staff numbers over the next 12 months and continue to offer apprenticeships and grow talent from grass roots to try and fill the skills gap. The Scottish and UK Governments need to continue to support the sector and expand skills training for the future workforce in schools and colleges.”
Other major findings from the report:
- Optimism about growth is not reflected in business confidence, with 4% rating their business confidence as high for the next 12 months and 3% rating their business confidence high for the next 36 months
- 23% have lost or are at risk of losing staff as a result of Brexit
- 84% expect production costs will continue to rise over the next 12 months
- 76% (88% UK) invested in R&D in the last year but only 5% of business are spending more than 10% of turnover on R&D
- A quarter (21% UK figure) of businesses surveyed received grants in the last twelve months, mainly from Scottish Enterprise
- 88% view robotics, automation and the Internet of Things as an opportunity to be embraced
- In line with the UK picture, 49% of Scottish businesses plan to increase capital investment which could be linked to Industry 4.0 and the need for businesses to invest in production facilities to improve efficiencies and remain competitive
Craig Pollock, area director manufacturing at Bank of Scotland, said:
“Scotland’s manufacturing firms have flagged potential risks, such as the UK’s negotiations to leave the EU, rising production costs and staff shortages. These will need to be closely managed.
“Nevertheless, they are also broadly optimistic, with 65% of them saying they expect to grow over the next year. The Bank of Scotland is committed to supporting them as part of our pledge to help Britain prosper.”