By Bruce Robbins, business reporter

A NEW report published today by the Scottish Council for Development and Industry gives the country’s manufacturing industry grounds for optimism as it prepares to enter a new year.

Manufactured exports have increased year-on-year for the first time since 1999, with their value rising by £80 million to £14.9 billion.

The picture might have been even rosier but for a £200 million dip in the electronics sector.

With electronics removed from the equation, manufactured exports are at their highest level since 2000.

However, the SCDI’s independent survey of Scottish companies also found that total manufactured exports have decreased by more than a quarter since peaking in 1999 at almost £20 billion.

Manufactured exports to the European Union, which takes more than half of Scotland’s manufactured exports, recovered from a 10% fall the previous year to increase from £7.7 billion in 2004 to nearly £8 billion in 2005.

In contrast, manufactured exports to the USA, Scotland’s top individual market, fell back from £2.5 billion to £2.3 billion, and those to Asia Pacific, including China, reduced from £1.64 billion to £1.61 billion.

SCDI chief executive Alan Wilson said, “It is encouraging that manufactured exports from Scotland are rising again, albeit marginally.

“While the figures are still £5 billion down from their peak in 1999, this modest recovery must be counted as a success for the Scottish economy at a time of change.

“The fall in manufactured exports to the US last year, coupled with the current weakness of the dollar, is a concern. While US-owned manufacturers in Scotland or Scottish companies with large operations in the US may be relatively unaffected, it is the case that some manufacturers are suffering from rapidly deteriorating margins.

“On the other hand, Scottish businesses are benefiting from higher growth in EU markets.

“The fragility of the recovery in manufactured exports underlines why the economy should continue to be the top priority for Scotland’s political parties. SCDI believes that no party has yet come forward with a fully rounded package of measures for the economy.

“We hope and expect to hear more in the coming months on issues such as workforce skills, transport and support for international trade promotion.

“Political parties in Scotland and at a UK level should also be careful not to get caught up in a green bidding war. By choice and by necessity, Scottish manufacturers are up for change to a more sustainable economy and recognise the environmental and efficiency benefits for them.

“But government measures should be supportive and proportionate. Otherwise, the cost could be Scottish competitiveness and jobs.”

SCDI has been independently estimating the annual value of Scottish exports since the 1960s. Key findings in the its survey include:

*Manufactured exports from Scotland rose to £14.9.billion in 2005, up from £14.8 billion in 2004.

*Electronic exports fell again from £6.2 billion to £6 billion, having peaked at £11.2 billion in 1999.

*Manufactured exports, excluding electronics, remained at the same relatively consistent level which they have held for the last five years, rising from £8.6 billion to £8.8 billion between 2004 and 2005.

*On average, companies were predicting a 3% increase in the value of manufactured exports in 2006, with the largest increases predicted for chemicals, fabricated metals and machinery and equipment.

*The EU remained Scotland’s biggest regional export market with a 53% share, followed by North America at 17% and Asia Pacific (excluding Japan) at 11%.

*The US was again the top national market for Scottish manufactured exports although it showed a decline (down from £2.5 billion to £2.3 billion). Germany remains marginally ahead of France in second place, both showing small increases (£1.41 billion to £1.49 billion and £1.40 billion to £1.45 billion). Manufactured exports to Spain continued to rise (up from £818 million to £851 million) and it has overtaken Italy to become the fifth most important destination.

*Manufactured exports to the United Arab Emirates have more than doubled (from £90 million in 2003 to £193 million in 2005) since the Glasgow-Dubai direct air route was launched.