First, the good news...

count the downside of devaluation.

DEVALUATION is the economic strategy which, as far as Government

ministers are concerned, dare not speak its name. Euphemisms such as

flotation or realignment abound, and Harold Wilson is still best

remembered for his ''pound in your pocket'' speech in 1967, having

previously spent months denying the prospect of any devaluation.

Similarly, Messrs Major and Lamont swore that they would fight to the

end to keep sterling in the ERM. The end duly came on September 16. But,

for the Scottish economy, was that Wednesday two months ago quite as

Black as it has been painted?

''Rather than viewing it as some sort of a disaster, I think the exit

from the ERM should be seen as an opportunity for a range of Scottish

exporters to increase their volumes,'' said economist Craig Campbell of

the Scottish Council Development and Industry.

The effective devaluation of sterling -- around 15% against most major

currencies -- should theoretically make British goods sold abroad up to

15p in the pound cheaper, similarly with contracts denominated in

pounds.

Scotland exports more per head than the rest of the UK, in fact more

than even Germany or Japan, accounting for around 25% of Scottish

manufacturing output.

Whisky sales abroad alone are worth around #1700 million a year, while

the vital North Sea oil industry, its production measured in dollars

while most costs are in sterling, is another obvious big gainer.

SCDI statistics estimate the jobs dependent on export activity in

manufacturing industries, including whisky and other drinks, at just

under 100,000. Germany, France, United States, Holland, and Italy are

the leading overseas markets.

Thus by comparison with the rest of the UK we should benefit most from

being able to boost foreign sales and/or inflate sterling profit

margins. But, of course, life is not as simple as that.

For one thing, outside the crucial whisky industry which for obvious

reasons relies on purely homegrown produce, most of our other

export-geared manufacturing industries -- office equipment, electronics,

chemicals -- rely on at least some parts brought from abroad.

So what is is gained on the swings of higher export profits can often

be lost on the roundabouts of more expensive imported components.

The widespread practice of currency hedging also means that the

positive impact for many bigger companies could be delayed for months.

In any case, the devaluation will hardly have escaped the notice of

foreign importers who have already started asking for discounts in an

attempt to skim off some extra profit.

''While I think the development will undoubtedly help our company,

much will depend on tough negotiations with our distributors who are

also working in very competitive conditions,'' comments Brian Ivory,

managing director of Glasgow-based Highland Distilleries.

Around 40% of its Grouse blend, Highland's leading brand, is exported

with around 100,000 cases going to France alone.

Drinks, mainly whisky of course, make up more than 20% of Scotland's

estimated #9000m in manufactured exports and the most striking benefit

for Scotch from the devaluation could be the still huge but largely

moribund US market.

Only 20 years ago the United States took about 50% of all Scotch

exports. For a number of reasons, this figure is now down to under 20%

though this year has seen something of a revival in trade prospects.

''The cheaper pound could well be the very factor needed to breathe

some life back into the American market which, because of its size,

would need only a small increase to create quite an impact within the

trade,'' says Tony Tucker of the Scotch Whisky Association.

The North Sea oil and gas industry, already past its peak but still

vital for the economy of Grampian and beyond, received probably the most

immediately noticeable boost from the cheaper pound.

Although oil production fell 1.4% in September, revenue rose by just

over 6% to #20.4m a day mainly because of the falling value of sterling.

And these conditions applied only during the second half of the month.

Provided world oil prices, denominated in dollars, and production

remain relatively steady, October should see a spectacular rise in rev-

enue as it will be the first full month to show the currency impact.

The ''trickle-down'' effect throughout the legion of small service

companies which rely on a buoyant North Sea market is also important, as

in the case of Edinburgh Oil & Gas, a minor player in the exploration

league.

''I've received an instant 20% increase in revenue benefits and with

underlying costs in sterling, the viability of borderline exploration

wells is also boosted,'' explains Edinburgh's managing director Alf

Bissett.

''Given fixed operating costs, the exit from the ERM may improve my

net monthly operating revenues by up to 40%,'' he adds. The devaluation

effectively means that all UK oil producers receive around #2 more per

barrel of oil.

Alf Bissett's views were echoed by Tony Bellhouse of Spider Systems,

one of the few Scottish-based computer companies that actually makes and

develops its owns hardware and software for a wide range of

applications.

''We hope to sell between 30% and 50% more abroad because the

Americans are particularly strong in our market and the realistically

valued pound against the dollar makes us far more competitive,'' he

says.

Around half of Spider's #20 million turnover is exported, a figure

which was already rising but looks set to soar now.

But one leading Scottish industrialist who is far from happy about the

devaluation, despite the likely benefits for his company, is Ron

Garrick, chief executive of Weir Group. Its reputation as an

international operator is such that its shares rose by almost #1 to

#5.79 in the wake of the ERM exit.

The Glasgow-based company is arguably Scotland's top engineering

concern, not that there is much competition, which is exactly Garrick's

point.

''We are certainly more competitive now, but having said that, we were

already competitive against the deutschmark before the devaluation,'' he

says.

''However during the Eighties we as a country lost so much of our

manufacturing capacity that we now have to import many products

previously made in Britain, and these will cost more.''

Like many businessmen and economists, Garrick is concerned that the

positive side of the devaluation will gradually be eroded by longer term

repercussions such as inflation, which is sure to be sucked upwards by

the import of correspondingly dearer goods.

Britain is particularly vulnerable to this because total imports of

goods and services accounted for 35% of Gross Domestic Product compared

with only 25% in the early Eighties.

Prices rises will invariably feed through to increase the pressure for

higher wages and so the unit costs of UK-produced goods will also go up,

making them less competitive abroad.

Almost inevitably, Britain will become poorer compared with the French

or the Germans, says Garrick. ''Successful economies see their

currencies becoming worth more, not less. And they sit at the top of the

pile in terms of spending power.''

Devaluations, he maintains, offer a largely illusory and temporary

boost to Britain's future as an exporting country. The Government ought

to direct its attention into such areas as export credits, overseas aid

and resources for research and development. But that is another story

altogether.

''If we keep on like this we will not be in the slow lane of Europe.

We'll be stationary -- on the East Europ-

ean fringes,'' he concludes gloomily.