Key findings:
- Scottish private sector output falls for third straight month
- Staffing levels rise fractionally
- Price pressures slow but remain high
The latest Royal Bank of Scotland Growth Tracker showed a third straight monthly decline in activity during June. That said, the data also highlighted a slight uptick in payroll numbers.
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 – showed 47.6 in June, up from 47.1 in May, to signal a slightly slower reduction in business activity across Scottish private sector firms.
According to anecdotal evidence, the latest fall was due to a weaker economic climate, lower business confidence and reduced intakes of new work.
Following two consecutive months of job shedding, June data revealed a slight uptick in employment across Scotland's private sector. While some businesses decided to take on new hires amid fresh projects and planned expansions, others indicated that the completion of contracts, non-replacement of voluntary leavers and redundancies had dampened overall growth in employment.
At the same time, while cost increases across Scotland rose at their slowest pace since March, they remained high.
Commenting on the Tracker’s findings, Judith Cruickshank, Scotland Board Chair, Royal Bank of Scotland, said:
"The Royal Bank of Scotland Growth Tracker for June rounded off a challenging second quarter for Scottish businesses. Inflation, while continuing to fall from its peak earlier this year, remains high and continues to drive market uncertainty and demand weakness.
“As such, we again saw a contraction in business activity for the third month in a row. The difficult backdrop also led Scottish businesses to report muted expectations around future activity.
“However, despite these challenging circumstances, Scottish businesses have remained resilient, with private sector employment increasing, albeit only slightly, which contrasted with falls across all other UK regions and nations. This suggests that should inflation continue to fall then we may see Scottish business confidence and activity improve in the second half of 2026.”
Performance in relation to UK
Business activity across the UK as a whole also fell in June. Nevertheless, the reduction seen at the UK level was less pronounced than in Scotland.
As has been the case since October 2024, new business received at Scottish private sector firms fell in June. The pace of decrease eased however from May's 40-month record. Survey respondents widely attributed the fall in new work to weak demand conditions.
New business decreased at a faster rate in Scotland than across the UK as a whole.
Business sentiment across Scotland's private sector remained generally positive in June. Firms that expected output levels to rise over the next 12 months often linked this to hopes of improved demand conditions and new project wins. That said, the degree of confidence ticked up only slightly from May and remained subdued. A number of firms noted that the rising cost of living and market uncertainty had weighed on overall expectations.
In fact, of the 12 monitored UK regions and nations, only Northern Ireland recorded a lower level of optimism than that seen in Scotland.
With the exception of Scotland, all monitored UK regions and nations registered job losses during the latest survey period.
Companies based in Scotland registered a decrease in outstanding business in June, thereby stretching the current run of reduction to 11 months. Firms noted that a lack of incoming new work allowed them to complete orders in a timely manner.
The pace of backlog depletion was the weakest in 2026 so far and slower than the UK-wide average.
The seasonally adjusted Input Prices Index retreated further from April's recent high to a three-month low and remained below the reading seen for the UK as a whole. That said, it was indicative of a marked rise in costs that was much sharper than the historical trend. Panellists often noted that higher fuel and labour costs had pushed up expenses.
Likewise, average prices charged for goods and services in Scotland rose at the slowest rate for three months. Nevertheless, the pace of inflation remained fast overall, as firms looked to pass on higher costs to customers where possible.
Price inflation across Scotland was also slightly sharper than the UK-wide trend.
About PMI
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About Royal Bank of Scotland
For almost 300 years, the Royal Bank of Scotland has succeeded with our Scottish customers, supporting them with their personal, private, and business banking needs. The Royal Bank of Scotland, part of the NatWest Group, helps customers from opening student accounts, to buying their first home, setting up a business, and saving for retirement. As Scotland’s biggest bank for business, we offer businesses specialist sector knowledge in a wide range of areas, as well as access to expert entrepreneurial support. To learn how we can support you, go to www.rbs.co.uk.
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