QEI Q3 illustrates robust trading performance

The latest SCC Quarterly Economic Indicator Survey for Q3 of 2018 illustrates a broadly positive Scottish economy, but slowing investment across a range of sectors, and a challenging set of results for the manufacturing sector suggest that the need for certainty on the UK’s Exit for the European Union is paramount.

Read the results here.

Driven by rising costs of raw materials, the manufacturing sector has posted its first negative result for optimism/business confidence since 2016, despite a reasonably strong set of financial results.  Expectations in the sector for future revenue and investment both sit substantially lower than for the previous quarter.

The survey has also observed slowing investment trends generally throughout the third quarter, with all sectors bar retail experiencing a decline in investment relative to the second quarter.

Our results also show that external pressure continues to act as a challenge for some key sectors, with construction and manufacturing particularly impacted by the rising cost of raw materials.  63% of manufacturing firms indicated that rising raw material prices were acting as a growing cost pressure.

KEY FINDINGS / OVERALL NATIONAL RESULTS:

Generally, robust financial results across sectors, but declining investment and expectations for the future.
21% of firms across the sample reported declining optimism, relative to 15% last quarter.  This still suggests positive business confidence overall.
43% of firms reporting increased overall revenue, with only 17% reporting a decrease.
16% of firms reported declining business investment in this quarter, compared to 11% in Q2.
On a sectoral basis: Construction, Business Services, Manufacturing and Tourism all report declining investment levels this quarter.
Investment expectations for the future are slowing, with 27% of firms looking to increase investment this quarter, compared to 32% in Q2.
On a sectoral basis: Investment expectations for the next quarter sit below average for Construction, Manufacturing, and Retail.

Commenting on the results, Neil Amner of Anderson Strathern and Chair of the Scottish Chambers of Commerce Economic Advisory Group, said:

“Our survey results for the third quarter of 2018 suggest that the Scottish economy continues to be resilient, but firms are becoming cautious as uncertainty grows around the future trading environment with the European Union. Investment in Q3 and future expectations of investment are beginning to show signs of slowing across many of the analysed sectors.

“Although optimism remains relatively strong throughout the national sample, levels of business confidence have also softened relative to the second quarter.  It’s particularly concerning to see the manufacturing sector report a negative score for optimism. This is the first negative score reported since the third quarter of 2016, suggesting that the combination of rising material costs and continued uncertainty around future trading conditions are beginning to affect the confidence of businesses in this sector.”

Read the results here.