Bright prospects for Scotland’s strongest sector

Bright prospects for Scotland’s strongest sector

Royal Bank of Scotland Food & Drink PMI® shows that Scotland’s Food & Drink sector accounts for nearly one-in-four manufacturing jobs and underpins Scotland's position as the dominant force behind UK international trade in agrifood products.

Economic Analysis

09 October 2019

Scotland highlands

With a footprint of successful exporters spanning the length and breadth of Scotland, it is clear that food and drink manufacturers remain a critical engine of economic growth.

Royal Bank of Scotland’s new Purchasing Managers’ Index® (PMI®) data examines the production trends, export sales and business expectations signalled by Food & Drink manufacturers in Scotland.

The headline seasonally adjusted Scotland Food & Drink PMI® - a single figure measure of developments in manufacturing conditions - registered 53.5 in August, down from 53.9 in July. However, the index has remained above the 50.0 'no-change' value that separates growth from contraction in each month since June 2013.

A sustained improvement in Food & Drink business conditions for over six years stands in contrast to the trends seen across the Scotland manufacturing sector as a whole. The equivalent Royal Bank of Scotland Manufacturing PMI® reading was 49.6 during August.

Brexit uncertainty and an intensification of global trade tensions have taken their toll on business optimism across the Food & Drink sector. While still expecting growth in the coming 12 months, the latest survey data reveals that business confidence among food and drink producers is the lowest since this index began in 2012.

While near-term expectations have become less upbeat, data shows that new export sales across the Food & Drink sector continued to pick up in the three months to August. Resilient export sales have been achieved against a less favourable global economic backdrop. The Food & Drink Export Climate Index for Scotland signals the slowest pace of economic growth in overseas markets since May 2013.

A key reason to be optimistic that Scotland's food and drink producers can decouple from the recent global economic slowdown is the sector's exceptional record for gaining a foothold in new overseas markets, especially the opportunities provided by fast-growing consumer demand in emerging markets.

The export success of the whisky, bakeries and aquaculture industries means that Scotland accounts for 29% of all UK Food & Drink sales to overseas markets. In fact, Scotland exports more beverages by value than the rest of the UK combined.

The value of whisky exports to India and Japan has doubled since 2013, while sales to China and the United Arab Emirates have risen by around 50% over the same period.

The contribution of Scottish food and drink exports to rural economies is impossible to underestimate. Of particular note, Food & Drink is responsible for 41% of manufacturing jobs in the Highlands and Islands and this figure reaches over half of all manufacturing jobs along the Speyside Malt Whisky Trail.

Read the full Royal Bank of Scotland Food & Drink PMI®.
 

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