A modest decline in private sector activity across Scotland was accompanied by a further reduction in new business in September, the latest Royal Bank of Scotland Growth Tracker showed. Nevertheless, companies continued to expand their payrolls and at a strong pace.
The headline Royal Bank of Scotland Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of Scotland’s manufacturing and service sectors – printed 48.8 in September, little-changed from 48.9 in August, and thereby indicating a modest reduction in Scottish private sector output. That said, the headline index has now posted in contraction territory for six successive months.
Anecdotal evidence linked the latest fall in activity to fewer new orders and the increased cost of living.
Scotland and the North West were the only two areas among the 12 monitored UK regions and nations to register declines in output, with Scotland posting the faster pace of reduction. Meanwhile, business activity growth across the UK as a whole eased to a modest pace that was the softest in three months.
Encouragingly, staffing levels across Scotland rose for a fourth consecutive month in September. Survey respondents linked the latest increase in workforce numbers to efforts to support future output growth.
Commenting on the Tracker’s findings, Judith Cruickshank, Scotland Board Chair, Royal Bank of Scotland, said:
“Despite employment rising for a fourth consecutive month, Scottish firms signalled further declines in activity and new orders at the end of the third quarter.
“Business confidence also weakened as cost pressures continued to rise. Higher fuel costs, driven in large part by geopolitical tensions, were a key driver of inflation, alongside reports of increased raw material and labour expenses.
“With Scottish business activity seeing the fastest decline of any UK nation or region and with only Northern Ireland having lower business confidence, it is difficult to see how the current trend of rising employment will be sustained unless activity and sentiment improve. As our recent mid-market report found, one way to address this and deliver growth is for government and industry to support mid-market businesses in three key areas – tech, talent and trade.”
