Scottish manufacturers bullish for year ahead

Callum Carmichael (FRP)

SCOTTISH manufacturers are the most optimistic in the UK about the year ahead despite ongoing cost challenges, according to new research from specialist business advisory firm FRP.

96% of Scottish manufacturers surveyed by FRP feel confident about their ability to trade through the next 12 months – almost 10 percentage points higher than the national average (87%).

The results feature in a new national FRP report, Against the odds: The future of UK manufacturing , which points to a resilient sector that is looking to invest in advanced technologies to help stimulate new growth. FRP conducted a similar study at the end of 2022, which found that manufacturers were far less optimistic about their prospects.

Investment confidence returns

With inflation beginning to ease, the vast majority of FRP’s Scottish respondents – which range from SMEs to major employers – are convinced of the robustness of their supply chains, with nine in 10 (90%) expecting suppliers to continue trading successfully through the year ahead.

Their top investment priority is increasing output and/or productivity through the creation of new jobs (33%), which speaks strongly of manufacturers’ willingness to develop the sector’s workforce, while over a quarter (28%) plan to seize the opportunity presented by automation and AI. While over two fifths (41%) say they are already using AI, machine learning or automation to its full potential, almost as many respondents (37%) believe there is the potential to apply it more widely in their organisation.

Still, challenges remain for Scottish manufacturers – chiefly increasing energy costs (29%), wage bill pressures (23%) and the availability of materials (21%).

In response, manufacturers are planning a range of measures including increasing prices for customers and distributors (41%), exploring refinancing options (33%) and – more positively – introducing or expanding the use of automation or AI in production (33%).

Callum Carmichael, based in FRP’s Edinburgh office, said: “It’s encouraging to see that confidence is returning to Scottish manufacturers after a difficult year. Not only does this demonstrate the strength of the industry locally but it’s also a prime example of how the development of resilient, reliable supply chains can help protect against global shocks.

“However, it is important to stress that we are not out of the woods yet, due to the ongoing inflationary pressures but also the requirement for continued investment which will be required to help capitalise on any uptick in demand in the year ahead.”

“Looking at the results of this report, I’m confident that manufacturers have the plans in place to succeed, with a singular focus on their long-term growth and prosperity.

“The results reflect what we are hearing anecdotally across FRP, as many of the supply issues firms reported last year have now been resolved to a large extent, with the most pressing concerns now on the demand side of the scale. We would hope to see at least a small recovery in demand as inflation eases and consumer confidence stabilises.

“While we await those changes to take effect, it’s heartening to see manufacturers exploring the potential of new technologies, including Artificial Intelligence. The cost of adopting AI can be high and include a lengthy payback period. But, for those that have access to funding, it is something they should be looking at to drive efficiencies and free up human resource.”

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