Scots manufacturing faces year of turmoil

Published on Monday 17 March 2003 00:00

SCOTLAND’S beleaguered manufacturing sector is braced for further turmoil this year, according to independent forecasting group Cambridge Econometrics, which has predicted 32,000 jobs will be lost across the country because of the ongoing recession.

Industrial output in the sector, which last year tumbled into recession for the second time in five years, is expected to lag behind the rest of the UK by at least 0.5 per cent.

In the latest edition of its influential Regional Economic Prospects report, Cambridge Econometrics said the growth of Scotland’s manufacturing output "will be among the slowest in the UK, at 1.75 per cent in 2003, as the manufacturing recession continues and construction output declines".

Scotland is benefiting from the increase in the outsourcing of legal, accountancy, media and IT services to specialist companies, Cambridge Econometrics said.

But its report predicted unemployment in Scotland will rise by 1.5 per cent - equivalent to 32,000 jobs - with job cuts in manufacturing set to increase by 5.5 per cent.

London and the south-east of England will also see growing unemployment this year, but the numbers there will rise slower than elsewhere in the UK.

In contrast, employment is forecast to increase in the south-west of England and Northern Ireland, boosted by growth in the service sector.

The report adds: "Following a sharp decline in manufacturing output in 2002, estimated at more than eight per cent, a further decline of almost one per cent is forecast in 2003. The weakened demand for electronics has greatly affected Scottish production."

Cambridge Econometrics noted that, while some manufacturing recovery is expected in Scotland’s electronics industry, it is "far from certain that Scotland will continue to attract the scale of inward investment it has seen in the past".

But Sun Microsystems, the United States computer giant, last month confirmed 700 jobs would stay at its West Lothian plant while hundreds more will be created.

Sun said it would spend 36 million on a major extension to its factory in Linlithgow. Production at the plant will also be boosted by 50 per cent and a call centre established at the site. The news follows the fear of redundancies after the group said it would slash jobs worldwide. Earlier this year, Sun announced a massive quarterly loss of 14 billion.

The Scottish Manufacturing Steering Group, which last month issued its first report since being reconvened last year, has called on the Scottish Executive to do more to promote business north of the Border.

Dr Chris Masters, the former Aggreko executive chairman who was chosen to chair the steering group last August, said he recognised there were no "quick fixes" to the problems facing Scotland’s manufacturers.

Despite the gloom affecting the industrial sector, Cambridge Econometrics said Scotland’s services sector will grow by three per cent this year, in line with the rest of the UK.

Financial and business services are expected to see a continued strong performance, with output growth of four per cent in 2003.