Manufacturers in Scotland reported that new orders rose at the fastest pace in more than 40 years in the quarter to July, driven by record growth in domestic orders, according to the latest CBI Scottish Industrial Trends Survey

The survey of 34 Scottish manufacturers found that firms anticipate the strong demand to carry over to the next quarter.

Numbers employed increased at the fastest pace on record and hiring intentions for the upcoming quarter are solid.

Expectations for total orders growth are at a three-year high, supported by the brightest outlook for export order growth in a decade.

Output rose at the fastest pace in almost 30 years and expectations for growth in the coming quarter are the strongest since October 2014.

A record proportion of firms cited labour shortages as a likely limit on capital expenditure plans for the year ahead.

CBI Scotland Director Hugh Aitken said: “It has been a remarkable quarter for Scottish manufacturers with orders and output growing at the fastest pace we’ve seen in decades, suggesting the sector may be beginning to regain its poise after a difficult 2016.

“Indeed, firms expect decent growth in activity to persist into the next quarter.

“Firms are taking on new staff at a record rate and plan on further increasing headcount over the next three months, though it is clear that accessing skilled labour is a principal concern of manufacturers and is being flagged by a third of our panel as being likely to force them to hold back on investment.”

Key findings of the survey, according to CBI Scotland:

• 37% of firms said they were more optimistic about the general business situation than three months ago and 8% were less optimistic, giving a rounded balance of +30%. Optimism about export prospects for the year ahead also grew solidly (+16%).
• 57% of businesses reported an increase in total orders, and 8% a decrease, giving a rounded balance of +50%, the highest since October 1973 (+59%)
• Growth in domestic orders (+55%) reached an all-time high, while export orders (+23%) also expanded at a stronger pace
• 59% of manufacturers said employee numbers were up, and 13% said they were down, giving a balance of +46%, the highest on record
• 60% of firms said the volume of output over the past three months was up and 13% said it was down, giving a rounded balance of +46%, the highest since April 1988 (+53%)

Key findings – looking ahead:

• Expectations for total new order growth (+26%) are the highest since July 2014 (+27%)
• Expectations for domestic order growth (+18%) are firm, whereas those for export order growth (+36%) are the highest since April 2007 (+71%)
• Expectations for output growth (+26%) are the highest since October 2014 (+37%)
• Expectations for growth in employee numbers (+11%) are solid
• Planned investment in training and retraining (+20%) is the highest since October 2014 (+23%), whereas intended capital expenditure on buildings (-30%) is the lowest since January 2016 (-36%)
• The proportion of firms who cited labour shortages (32%) as a factor likely to limit their capital expenditure authorisations was the highest on record