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Scotland near top of UK table, key survey reveals

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The business activity index for Scotland’s private sector economy rose from 49.4 in December to 51.7 last month on a seasonally adjusted basis, moving above the 50 mark deemed to separate expansion from contraction to signal the first growth in six months.

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Only London, the West Midlands and south-west England grew faster than Scotland in January, according to the survey.

And Scotland was behind only London when it came to the strength of employment growth.

The continuing rise in employment in the Scottish private sector economy in January – extending the run of increases to a year – was driven by the services sector.

Employment in Scotland’s manufacturing sector fell for the first time in four months.

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Royal Bank said: “The Scottish labour market remained resilient, with employment now rising for a year. However, job creation was limited to the service sector. Here, surveyed businesses noted that planned growth and anticipated orders led to stronger recruitment drives. Meanwhile, goods producers registered a fresh decline in staffing levels for the first time in four months.”

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The bank highlighted the contrasting performances of the Scottish manufacturing and services sectors in January.

Royal Bank said of the rise in business activity last month: “The upturn was solely reliant on the gains made in the service sector, while manufacturers reported a further sharp reduction in production volumes.

“The service sector benefited from improved demand conditions, and reported a second consecutive monthly rise in new orders. However, manufacturing firms struggled to drive sales in the latest survey period. The opposing pull of the sectors meant only a fractional fall in overall new orders.”

The survey showed Scottish private sector firms “remained confident regarding the year-ahead outlook in January”, although they were slightly less optimistic about the prospects for increased business activity on a 12-month horizon than they were in December.

Royal Bank said: “Hopes for improvement in business conditions and increased marketing plans were said to have underpinned expectations. That said, the degree of confidence dimmed slightly from December’s seven-month high, and was the weakest of the 12 monitored UK regions and nations.”

Judith Cruickshank, who chairs Royal Bank’s Scotland board, said: “The Scottish private sector recorded an uplift in activity at the start of the year. The upturn was the first seen in six months and solid overall. However, growth was imbalanced, centred solely at service providers who have shown resilience amid a subdued economic climate. Meanwhile, the manufacturing sector reported a further sharp deterioration.”

She added: “Going forward, Scotland’s private sector maintains a healthy outlook for output in the coming 12 months. However, elevated inflation and interest rates as well as lingering economic uncertainty could undermine growth prospects.”

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