SCOTTISH MANUFACTURERS BACK EU MEMBERSHIP

Scottish manufacturers are overwhelmingly in favour of the UK remaining a member of the European Union ahead of next year’s referendum on this key issue. Only 4% of Scottish respondents to the latest annual manufacturing and engineering survey conducted by Henderson Loggie, in conjunction with the other eight members of the MHA association of independent accountancy firms around the UK, thought it would benefit British business and the economy to leave the EU. The equivalent response for all UK respondents was 10%.

However, 56% of Scottish respondents, and 59% of all UK respondents, thought that continued membership should see the terms of membership renegotiated, indicating dissatisfaction with current arrangements.

The annual survey was conducted during July and was carried out in Scotland in conjunction with Bank of Scotland, and with Lloyds Bank Commercial Banking elsewhere in the UK. Four hundred and four companies provided information, with 48 being based in Scotland.

The Eurozone represents the most popular market (72%) for those Scottish manufacturers who export, and is also number one with UK manufacturers who export at 98%.

However, in spite of the clear desire to remain within the EU and of the Eurozone’s importance as a market, exports by Scottish manufacturers are lower than the UK average. Only 31% of Scottish respondents said they currently export compared with 62% for the UK as a whole.

Henderson Loggie partner, Gavin Black, comments:

“The percentage of Scottish manufacturers currently exporting is disappointing, but not totally surprising. Our survey echoes the latest findings of Scottish Engineering’s Quarterly Review to June 2015, which reports that ‘export orders in general have tumbled further into negative territory.’ It is concerning, but Scottish manufacturers are a resilient bunch.”

This view is reflected by the survey finding that almost three in four (74%) of Scottish respondents think their business will grow over the next 12 months with only 11% anticipating a decline. This compares with 76% and 7%, respectively, for UK-wide responses.

Other major findings from the survey are as follows [UK-wide responses shown in square brackets]:

• Increase in wage costs is the main concern (62%) over what will drive up production costs during the next year [UK 71%]
• Red tape is a problem for the vast majority of respondents (98%) - Scottish and UK -  and 70% of Scottish respondents feel it is a burden which is increasing [UK 55%]
• In terms of recruitment, the main challenge for Scottish respondents (49%) [UK 54%] lies in finding experienced engineers and other skilled staff, including machinists/technicians
• 60% of Scottish respondents expect to take on trainees/apprentices next year [UK 56%]
• Currently, 66% of Scottish respondents made some investment in R&D compared to 79% for the UK as a whole
• 32% of Scottish respondents indicated they are not aware of R&D Tax Credits [UK 17%]

Andrew Stark, Senior Manager Manufacturing, SME Banking, Bank of Scotland, adds: “Scottish manufacturers are increasingly looking at the funding options available to drive investment into their businesses. Whether that be through increased levels of research and development or to explore new markets, it is encouraging to see a number of manufacturers with a positive outlook on future trading conditions.

“While it is clear that challenges remain, with further support and investment the resilience of the country’s makers will undoubtedly push the sector forward as businesses look further afield for future growth.”

Gavin Black concludes:

“Scottish manufacturers face similar pressures to most of those elsewhere in the UK. However, distance to principal markets is an additional burden and it is interesting that they see red tape as increasing at a greater rate than those elsewhere.

“They appear to be lagging behind their counterparts elsewhere in the UK in terms of R&D investment and in awareness of R&D Tax Credits, but from what I see first-hand on client visits in Scotland I still believe we have some of the most innovative manufacturers in the UK.”