Manufacturing in Scotland needs support as cornerstone of economy -BDO

Manufacturing in Scotland needs to be encouraged as the sector experiences a downturn in activity according to the accountants BDO.

The firm said it believes that manufacturing, which experienced a four point dip in the latest BDO Manufacturing Optimism Index, is a vital part of the Scottish economy and is calling for positive action to encourage the sector in the forthcoming budget announcements both at Westminster and Holyrood.

In Scotland in 2014 there were 8,550 manufacturing enterprises employing 181,630 people with a combined turnover of £41,112m, making manufacturing the third highest sector by turnover (after mining, utilities etc and wholesale and retail trades), and the second highest by employment after the wholesale and retail trade. Its importance as a key component of the Scottish economy cannot, therefore, be underestimated.

It is vital that the largest manufacturers are maintained and continue to be attracted to Scotland as they make up the bulk of turnover and employment. Firms employing more than 50 employees account for 135,400 employees which is 74.5% of the total in the sector and £36,701m (89.3%) of total manufacturing turnover.

Martin Gill, head of BDO LLP in Scotland, said: “BDO’s monthly Manufacturing Optimism Index found that the sector was at its lowest level since March 2013 and the concern is that this is an essential part of the Scottish economic mix which needs to be nurtured and developed. There is an opportunity, for example, in the forthcoming budget in July to reduce the rate of National Insurance for manufacturing to stimulate growth. In Scotland we project that this could create up to 5069 jobs and boost GDP by over £202m per year.

“The further concern is that we must make Scotland attractive to overseas investors interested in manufacturing. At present although there are only 400 (4.7 per cent of Scottish manufacturing sector) overseas-owned manufacturing enterprises in Scotland they account for 55.8 per cent of turnover and 32.5 per cent of employment.

“If any of this relatively small number of firms should find a more favourable tax regime or financial incentives elsewhere either abroad or within the UK then Scotland could start to experience a real drop in GDP. It is equally important to ensure that Scottish and UK firms continue to find Scotland an attractive base for their manufacturing activities.”

Mr Gill concluded: “Manufacturing can often be ignored by policy makers yet it is a key component of the Scottish and UK economy. Encouraging manufacturing growth is a vital part of maintaining and developing the wider Scottish economy and we need to ensure that it gets all the help and support that it can.”