CBI warns Scots manufacturing output is heading for a fall

Published on Wednesday 25 October 2006 01:29

SCOTTISH manufacturing output is poised to fall over the next three months, with companies far less optimistic than they were during the summer.

CBI Scotland warned yesterday that the deterioration in the demand outlook had left domestic manufacturers with excess capacity. As a result, investment plans have been cut back and a "modest" reduction in staff numbers is expected.

The latest Industrial Trends Survey appeared to bring the recent strong run of manufacturing data to an end. It showed that the number of companies expecting new orders to rise in the next three months against those anticipating a fall produced a balance of minus 5 per cent, breaking a year of positive numbers.

Over the last three months, there was a fall in the volume of domestic orders, although export orders increased at the fastest rate for more than a decade.

Iain McMillan, director of CBI Scotland, said: "The indications from this survey are that the strong activity recorded by Scottish industry over the past few years may not be sustained.

"Despite encouraging data about planned increases in spending on training and product innovation, optimism about the general business situation and prospects for exports have dipped. Firms are steeling themselves for a harder year ahead."

Giving his initial reaction to the report, Professor Brian Ashcroft of the Fraser of Allander Institute said: "It's valuable evidence that we need to factor in."