Limits to growth laid bare by FSB

TRANSPORT COSTS, supply chain issues and late-paying customers are conspiring to constrain the ambitions of Scotland’s manufacturing base, new research has found.

The Federation of Small Businesses in Scotland’s latest report found while the manufacturing sector had contracted in recent years it still made a disproportionately large contribution to the country’s economy.

However, the findings indicate that while 41% of small manufacturers plan to develop new products, 23% want to expand into new sectors and 22% are looking to grow into new markets, many of them are being held back by the economic climate.

The cost of fuel was cited by 95% of respondents as a reason for the lack of growth, and 88% said transport was a barrier to expansion.

Andy Willox, the FSB’s Scottish policy convener, said the new report gave a clear overview of Scotland’s industrial base and the issues it faced including increased costs and concerns over late payments.

He said it was essential to know the root causes of the problems.

“If Scotland has ambitions to grow its manufacturing base, we really need to understand the profile of those small manufacturers,” Mr Willox said.

“Our research shows a diverse mix of businesses, operating across the length of the country, producing a vast array of goods.

“The rising cost of transport and fuel is squeezing many in business, and manufacturers are no exception.

“However, they also face additional pressures piled on by supply chain problems and late-paying customers.

“Only half of our small manufacturers export. Those who don’t point to a perceived lack of international demand or simply don’t think it is right for their businesses.

“Those who do point out that currency fluctuations and long payment periods can make life difficult.”

The study found manufacturing contributed £14bn in gross value added to the economy in 2008 — the equivalent of 15% of total national output for the year — despite employing just 8% of the overall workforce north of the border.

Of the manufacturing base, 89% were classed as small enterprises with less than 50 employees on the payroll while the 3% of firms that had more than 250 staff accounted for almost half of all employment in the sector and three-quarters of turnover.

Most companies had a turnover of less than £500,000 per annum and the base was diverse, with 21% involved in metal fabrication, 16% in food and drink production and 10% engaged in timber work.

The research pointed to a number of factors that were hindering — or stopping — Scotland’s small manufacturers from exporting their products overseas.

“The majority of those not currently exporting said their products were not appropriate for export due to the perceived lack of international demand, or that they simply had no ambitions in this regard,” the report states.

“When we asked what presented a barrier to exporting, the main reason cited was cost of reaching export markets and risk in terms of either foreign currency volatility, including uncertainty surrounding the eurozone, or potential lag times between production and payment.”

The study found manufacturing contributed £14bn in gross value added to the economy in 2008.