A total of 23 per cent of businesses surveyed for the Manufacturing & Engineering Report 2017-18 said this was due to uncertainty over post-Brexit EU workers’ rights and the slide in the value of sterling since the referendum 15 months ago.
However, manufacturers were still “upbeat” about prospects for growth in the coming year, with 65 per cent predicting expansion and 45 per cent expecting headcounts to rise.
The survey was conducted by accountancy firm Henderson Loggie, in conjunction with the MHA association of UK independent accountancy firms and Bank of Scotland, questioning 50 Scottish businesses as part of a survey of 460 UK‑wide.
“Scottish manufacturers are largely positive in their outlook and prospects for growth, and the sector is certainly gritting its teeth in what has been a difficult and uncertain period,” Gavin Black, manufacturing head at Henderson Loggie, commented.
“However, we should not be complacent and the survey has found that despite the ambitions, growth is being constrained and companies in the sector continue to be under increasing pressure to cut costs, meet the rising prices of raw materials and embrace new technologies if they are to survive.”
Black said the sector, about 12 per cent of the UK economy compared with a more dominant 75 per cent for the services industry, continued to face difficulty attracting staff “with the relevant skills”.
The report said 17 per cent of Scottish manufacturers also cited “a lack of motivated applicants locally for lower skilled jobs” as a crucial issue.
It found that Brexit had already had an impact on production costs. More than eight in ten respondents forecast that production costs will continue to rise, driven by the rising price of raw materials and components through the fall in the value of the pound.
Craig Pollock, area director for manufacturing at Bank of Scotland, said: “Scotland’s manufacturing firms have flagged potential risks, such as the UK’s negotiations to leave the EU, rising production costs and staff shortages. These will need to be closely managed.”
However, Pollock noted the broad optimism in the sector and pledged Bank of Scotland would give firms continuing support.