Scottish industry’s plunging confidence will hit investment

Published on Thursday 26 January 2012 00:00

SCOTTISH manufacturers are to scale back investment across the board as confidence has sunk to a three‑year low amid domestic and foreign pressures, business leaders revealed yesterday.

CBI Scotland claimed in its latest quarterly industrial trends survey that falling confidence, concerns over economic conditions abroad, and doubts about future demand was causing firms to cut plans to invest in machinery, buildings, training and innovation.

The organisation said it was the first time in three years that a majority of manufacturers had said they intended to reduce spending across all four investment indicators.

Iain McMillan, director of CBI Scotland, said the latest survey was “disappointing”, adding that “a weak economy and worries over the eurozone, our biggest export market, are affecting business confidence, and this is leading firms into shrinking their investment plans.

“A clear and orderly resolution to the eurozone crisis will be essential to prevent further effects on both domestic manufacturing and the wider economy, and to lift business confidence.”

It came as the manufacturing sector’s woes were highlighted starkly elsewhere.

Official data showed that, in the last quarter of 2011, the UK economy contracted 0.2 per cent, with most of the damage done by a 1.2 per cent slump in industrial output.

City bears said this put the UK on track for two quarters of negative growth, including the first quarter of 2012, which would plunge the country back into recession only two and a half years after it came out of the last one.

The CBI’s London office revealed that its UK industrial trends survey showed manufacturing output was stagnant in the three months to December, with domestic and export orders falling for the first time in two years.

John Cridland, the CBI’s director-general, said it was possible Britain could still avoid recession despite the latest data “but I would not bet my house on it. These figures are close to zero one way or the other.

“It’s clear a lot of damage was done to UK confidence by the eurozone crisis”.

The CBI revealed that overall 27 per cent of manufacturers said output rose in the past three months, while 26 per cent said that it fell.

The resulting rounded balance of plus 2 per cent was sharply weaker than the figure of plus 10 per cent last October.

In Scotland, McMillan called on the Scottish Government to provide pump-priming to help manufacturers to get better direct air connections to key overseas markets in a difficult economic climate.

“Similarly, the decision to block extra runway capacity in London has cast doubt over the UK government’s strategy for helping Scottish firms expand abroad,” he said.

“If we are to see a re-balancing of our economy towards investment and exports then it is important that firms are able to access London’s key interlining airports in order to target key overseas markets or service foreign-based customers.”

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