Scottish engineering shrugs off Brexit

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Scotland's engineering firms have shrugged off Brexit uncertainty and taken advantage of a weaker sterling, with a boost to output and exports.

The industry's latest quarterly survey found the balance of firms' trading positions was strongly positive.

The Bank of England's agent in Scotland said firms had moved beyond their initial "post-referendum gloom".

He said there was evidence they were shifting suppliers to the UK to capitalise on the weaker pound.

The engineering survey found a gap of 12 percentage points between those saying output was up and those saying it was down - 36% to 24%.

That gap rose to 30 points on those who said exporting activity was above normal, or 43% to 13%.

That exporting performance ended 13 quarters of negative figures from trade body Scottish Engineering.

Less optimistic

Machine shops had a particularly strong showing, with 63% of firms saying activity was up after tough times due to the oil and gas downturn.

In exports, transport and metal manufacturing were strongly positive, with a 50-point positive gap in the transport sector.

More companies reported production volumes were up than said were falling, by a margin of 14 percentage points - 27% to 13%. Expectations of volume growth were stronger still.

While 18% of firms surveyed said they were less optimistic than they were, 35% said they were more so.

Image source, AFP
Image caption,
Mr Dowson said the UK's new relationship with the EU would help determine future prosperity

Bryan Buchan, chief executive of Scottish Engineering, said: "After the initial shock of last year's Brexit vote, Scottish engineering companies have adopted the usual pragmatic approach and buckled down to getting on with business.

"Major areas of concern for all Scottish operations include the revisions in business rates, the relatively unfavourable mid-range personal taxation regimen, and the long-awaited details of the disbursement of the Apprenticeship Levy takings."

Oil price

The latest sector review includes a guest commentary from the Bank of England's agent in Scotland, Will Dowson, who wrote: "There's some uncertainty about the post-Brexit landscape, particularly for those companies that rely heavily on international trade, and some investment plans have been affected which could drag on over the coming years.

"It is clear that the UK's new relationship with the EU - and the reforms that it brings about both at UK levels and here in Scotland - will determine our long-term prosperity."

Mr Dowson's job sees him visiting a lot of Scottish firms to gather information for the Bank of England's decision-making. He notes a positive mood, saying: "Manufacturers note some increased sourcing from domestic suppliers due to the fall in sterling. That decline, along with stronger global demand, had led some to see a rise in export volume growth.

"There's even a chink of light for oil and gas sector companies, who have been encouraged by the recent rise in the oil price.

"In the services sector, locally many companies have shrugged off the post- referendum gloom and are reporting buoyant levels of activity. And so far households have not cut back their spending even though the cost of living is beginning to rise."

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