Scottish exporters feel pressure from China and eurozone

A weakening global economic picture typified by the slowdowns in China and the eurozone have hit exports at Scotland's small and medium-sized businesses, a new report out today revealed.

A Chinese national flag flutters against the office buildings at the Shanghai Bund shrouded by pollution and fog in Shanghai, China. Picture: AP

The proportion of Scottish businesses that export fell in the last six months of 2015 from 30 to 27 per cent, the latest Business in Britain report from Bank of Scotland said.

And it said those SMEs that do export now make 31 per cent of their sales overseas, down from 32 per cent mid-way through 2015.

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However, the survey said a net balance of one in ten Scottish exporters “expected to keep growing their overseas sales” during the first half of 2016.

While this represented a fall of 37 points compared with the first half of 2015, 39 per cent of exporters still expect their ability to compete in international markets to improve in the next six months as they become more “competitive”, against 7 per cent who think it will deteriorate.

Graham Blair, regional director of Bank of Scotland’s SME division, said: “As weakening growth in China and the eurozone creates headwinds for some exporters, it is unsurprising to see that less Scottish SME exporters are generating less of their sales overseas, but it’s encouraging to see that more businesses are looking to grow those international sales in the year ahead.

“Starting or scaling-up export activity can be a daunting prospect for businesses, but the benefits are many and we are working hard to support Scottish firms’ export ambitions.”

The mixed findings will be seen as casting a slight shadow over Exporting is Great Week, which starts today – a UK government campaign aiming to inspire and support 100,000 new exporters by 2020.

UK-wide, the Bank of Scotland report found that SMEs believe Europe will continue as the country’s biggest trading partner, with more than a third (37 per cent) of exporters predicting an uplift in sales there, against 19 per cent expecting contraction.

Despite the slowdown in the Chinese economy, just 
10 per cent expected sales to the Asia-Pacific region – which includes China – to fall, ­compared with 24 per cent which expected them to keep growing.

Blair acknowledged the “negative” connotations in Scotland, but added that there were “clearly still opportunities” for exporters to prosper.

A separate report out today from the EY Item Club forecasts that consumer confidence will continue to be the main driver of UK GDP growth this year, but that business investment will “pick up the baton” next year.

The EY report said that corporate investment was expected to rebound in 2017 “making up for the consumer slowdown”. It forecasts that rising inflation and a renewed fiscal squeeze will see growth in consumer spending slowing to 2.1 per cent next year, from a forecast rise of 2.5 per cent in 2016.