Jobs are being created among Scotland’s private sector businesses, despite subdued market conditions, as they anticipate a rise in orders.
The Royal Bank of Scotland Business Activity Index – which measures month-on-month changes in the combined output of Scotland’s manufacturing and service sectors – rose to 48.9 in August from 47.3 in July.
The pace of job creation was among the strongest recorded over the past two years. Some respondents linked the latest rise to company expansion plans, new projects and efforts to replace leavers.
Scotland was one of four areas to record a fall in output, with its decline the steepest overall. In contrast, business activity rose across the UK as a whole. However, Scottish firms became increasingly confident about activity prospects over the next 12 months.
The level of optimism rose further from April’s recent low to a six-month high, but remained weaker than the UK average. Firms hoped that continued investment in new equipment and new contract wins would help to drive growth.
The rate of backlog depletion across Scotland slowed since July, but was slightly faster than that recorded across the UK as a whole.
Judith Cruickshank, Scotland board chair at RBS, said the data for Scotland was “mixed” and more positive compared with recent months.
“The economy is showing tentative signs of improvement, with business optimism climbing to a six-month high and the pace of decline easing in both output and new orders,” she said.
“Employment remains a clear source of strength. Sustained job creation, despite challenging demand conditions, suggests that firms’ improved confidence is feeding through to hiring activity, with payrolls being lifted in anticipation of new projects and expansion plans.
“The inflationary picture remains challenging, but the direction of travel is encouraging. Cost pressures are easing and, if that continues, we could see price increases begin to moderate in the months ahead.”
New orders across Scotland’s private sector fell again in August, extending the current run of contraction to nearly two years. Anecdotal evidence linked the latest fall to a general market slowdown, ongoing geopolitical uncertainty around the Middle East, higher utility costs and subdued demand conditions.
Across the UK as a whole, new orders rose at a slower and only marginal rate.
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