Scottish manufacturers are more upbeat about exports than at any time since the 1960s, according to a survey published yesterday, defying conventional wisdom given the strengthening pound has surged through $2 recently.

The survey from the Confederation of British Industry in Scotland also signals manufacturers are rebuilding capacity again - rather than trying merely to squeeze out ever more productivity gains - with the first indication of plans to raise investment in plant and machinery since October 2005.

It also shows firms are much more confident about the strength of future demand in decisions to commit to capital expenditure.

CBI Scotland expressed hopes that the surprisingly strong export outturn might reflect a successful move up the value chain for manufacturers in the mechanical and electrical engineering and food and drink sectors. Such a move away from low-cost commodity production would tend to mean manufacturers would not find themselves uncompetitive just because a rise in the pound made their goods more expensive in overseas markets.

Subtracting the percentage of manufacturers reporting export order books were poorer than usual from that considering them better, a net 46% said they were above normal.

CBI Scotland said this was the highest such balance since records began around 1965.

This was in stark contrast to the finding published yesterday by the CBI in London that manufacturers in the UK as a whole considered their export order books below normal.

The UK-wide finding was more predictable, given that the pound last week rose through $2 and hit briefly a 26-year high against the US currency and that sterling has also been strong against the euro.

Sterling strength would have been expected to hit Scottish manufacturers hard, given their reliance on exports to France, Germany and the US and to Asian countries with currencies linked to the dollar, and their relatively high dependence on overseas sales.

Iain McMillan, CBI Scotland director, said: "We have got a $2 pound at the moment and yet our export performance, according to the survey, is very strong. We can't be entirely sure why the export performance is so good. It might be telling us, particularly in the industries which are contributing to these results, the mechanical and electrical engineering (sector), including electronics, and food and drink, (firms) have now moved away from the low-cost commodity manufacturing and into the higher-value end of the market where sales will be more resilient. It may be telling us that. We can't be sure yet, but that is one explanation.

"If it is, it shows that the manufacturing industry in Scotland is heading in the direction we want it to be and is well on its way."

Subtracting the percentage of firms which expressed less hope about export prospects for the year ahead from that which was more upbeat, a net 45% of manufacturers was more optimistic about overseas sales.

McMillan said this was the highest such balance since February 1968.

He also highlighted the survey finding that a net 69% of manufacturers were predicting a rise in export delivery volumes in the coming three months, and that this was "not just on the positive side of nothing".

McMillan also pointed to the net 71% predicting a rise in export order volumes in the coming three months.

A net 29% of manufacturers predict a rise in plant and machinery investment in the coming year in the latest survey. Only three months earlier, a balance of 20% forecast a drop in such investment on a 12-month time horizon. Highlighting signs that manufacturers were rebuilding capacity, McMillan said: "What we have seen in the past is real drives to increase productivity, but not much in the way of capacity-building."

Referring to the latest survey's finding that employment is rising again in the Scottish manufacturing sector, he added: "That is another area which underlines the other figures in the survey (showing) that there is capacity-building under way here and not just gains in efficiency. If it was efficiency gains that were being highlighted here, we would tend to see a reduction in employment rather than an increase."

This rise in the Scottish manufacturing workforce was in stark contrast to a sharp slide in employment in the sector UK-wide in the last three months indicated by the wider CBI survey.

Referring to the Scottish picture, McMillan said: "The employment figures seem to chime quite well with the capacity-building numbers."

As well as showing a stronger-than-expected rise in employment in the Scottish manufacturing sector in the last three months, yesterday's survey signalled expectations of further albeit-slower growth in headcount in the period to July.

Commenting on the overall survey results north of the border, McMillan said: "They are actually a good bit stronger than they have been for several months, which is pleasing.

"The figures would have been better if the domestic figures (orders from within the UK) had been better. The fact that manufacturing industry in Scotland has had a good export performance - that is very heartening indeed. These are the kind of figures that I think, in Scotland, we have been looking for for a long time."

On the downside, Scottish manufacturers reported a drop in output for the second consecutive quarterly survey, and this was one of the few areas where they trailed the UK as a whole. However, Scottish manufacturers predict a rebound in output in the coming three months.

l A strong employment picture was also painted yesterday by HBOS subsidiary Bank of Scotland's latest labour market report.

This showed an acceleration in both permanent and temporary employment growth in March.

Further increases in pay were recorded, with Bank of Scotland citing strong demand for staff and skill shortages.