Scottish business activity falls again as confidence hits five-month low
Royal Bank of Scotland's Growth Tracker found Scottish private sector output and new orders declining further in September, even as employment rose for a fourth straight month.
Scottish private sector activity fell modestly in September while business confidence dropped to a five-month low, according to the latest Royal Bank of Scotland Growth Tracker.
Royal Bank of Scotland said its headline Business Activity Index, which tracks the combined output of Scotland’s manufacturing and service sectors, has now shown contraction for six consecutive months. The bank said anecdotal evidence linked the latest fall to fewer new orders and the rising cost of living.
Scotland and the North West were the only two of the 12 monitored UK regions and nations to record declines in output, with Scotland posting the faster rate of reduction, Royal Bank of Scotland said. The bank added that UK-wide business activity growth eased to its softest pace in three months.
New business in Scotland also fell, extending a run of decline that has now lasted two years, with panellists attributing this to weaker demand and higher costs for goods and services, the bank said. At UK level, new orders continued to grow, though more slowly than in August.
Despite the downturn in activity, Scottish firms continued to expand their workforces for a fourth consecutive month, which Royal Bank of Scotland said reflected efforts to support future output growth. The bank noted that job creation in Scotland, while easing slightly to a three-month low, remained the strongest among the 12 monitored UK areas.
Business confidence weakened markedly, with only Northern Ireland reporting lower optimism than Scotland, the bank said.
Judith Cruickshank, Scotland Board Chair at 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.” She added that higher fuel costs, driven largely by geopolitical tensions, were a key driver of inflation, alongside rising raw material and labour expenses.
Cruickshank said: “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.”
Royal Bank of Scotland also reported that input costs rose sharply in September, the fastest pace in three months, driven by higher raw material, fuel and employment costs, while output price inflation in Scotland eased and was the weakest of all 12 monitored UK areas.