Scottish economy grows at fastest pace for six years but job cuts continue

The Scottish private sector returned to growth during August, with business activity rising at the quickest pace for more than six years, according to the latest Royal Bank of Scotland PMI.

The headline RBS Business Activity Index – a measure of combined manufacturing and service sector output – rose from 49.3 in July, to 55.8 in August, to signal the first increase in Scottish private sector output since February.

Growth was broad-based at the sector level, although uneven, as manufacturers registered noticeably sharper increases in both output and order book volumes than service providers.

The easing of lockdown measures and improved client demand were frequently associated by panellists to the rise.

Malcolm Buchanan, Scotland Board chairman at Royal Bank of Scotland, said: “The Scottish private sector showed some very encouraging signs in August.

“Business activity rose at the quickest rate since July 2014 and new orders increased for the first time since February, amid reports that looser lockdown restrictions had allowed the economy to reopen and released pent-up client demand.

“Still, things are not back to normal. Capacity pressures remained weak and, as a result, firms made further cuts to their workforces. The rate of job shedding remained sharp, despite easing further from April’s record.

“Although data provided positive signs the recovery is beginning, ongoing improvements in demand conditions are needed to ensure it keeps momentum.”

The 12-month outlook for activity among Scottish private sector firms remained positive for the fourth month running.

Anecdotal evidence linked confidence to improved demand amid looser lockdown restrictions, alongside hopes of a timely recovery from the economic blow dealt by the pandemic.

Sentiment moderated from July, but remained historically strong.

Across the 12 monitored UK areas, only the North East of England and Northern Ireland registered a weaker outlook than Scotland.