Scots firms lag behind fresh export optimism

SMALLER manufacturers are seeing the first signs of an export-led recovery as optimism about overseas sales prospects reaches a 15-year high, according to a report published today by the CBI.

• The CBI's Russel Griggs says UK SMEs expect overseas sales to fuel recovery

But Dr Peter Hughes, chief executive of trade body Scottish Engineering, warned that it was "too early" to suggest small firms north of the Border were benefiting from the weak pound.

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His comment will fuel fears that Scotland's economy recovery could lag behind that of other parts of the UK.

Firms taking part in the CBI's quarterly small and medium-sized enterprises (SME) trends survey reported that overseas orders had stabilised after seven quarters of decline.

While manufacturing production also steadied, the firms warned that output is expected to fall in the next quarter as overall demand remains weak.

Russel Griggs, chairman of the CBI's SME council, said: "Smaller manufacturers have been pinning their hopes on the relative weakness of sterling to boost overseas orders and offset weak demand at home. It is therefore encouraging that exports are now stabilising.

"Small and medium-sized manufacturers are also expecting overseas orders to grow in the coming months, and are the most upbeat about export prospects for 15 years."

But Griggs – who is also chairman of the Scottish Government's regulatory review group – added: "With the economy only just edging out of recession, conditions will still feel challenging for smaller firms. Domestic orders are likely to remain depressed, and firms expect output to fall in the next three months."

While domestic orders continued to decline, they did so at their slowest rate since April 2008.

Yet small manufacturers still expect domestic orders to fall again in the next quarter.

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Overall, the volume of new orders fell in the past three months, but at a slower rate than the previous quarter.

Hughes said the enthusiasm expressed in the CBI's report was not being felt within the Scottish engineering sector.

He said: "It is too early to suggest that the small engineering companies in Scotland are gaining any benefits from the weakness of sterling. We have too many companies that are still not yet out of the woods where recession is concerned.

"A significant number of engineering manufacturing companies are finding that they are still having a hard time in the marketplace."

Hughes's comments will stoke concerns that Scotland could lag behind the rest of the UK during the economic recovery.

Official figures from the Office For National Statistics last week showed that the UK economy had clawed its way out of one of the longest recessions ever, with the nation's gross domestic product (GDP) growing by 0.1 per cent in the final quarter of last year.

Although Scotland has been shielded from the worst of the economic slump, some commentators fear that the economy north of the Border will not be able to match the UK GDP growth rate.

The CBI survey ran from 10 December to 6 January, with 418 firms of fewer than 500 staff taking part.