Scotland’s private sector economy returns to growth but lockdown pressures remain
Scotland’s private sector economy returned to growth last month but lockdown measures are continuing to stifle business in several sectors, a report today suggests.
The seasonally adjusted Royal Bank of Scotland business activity index – a measure of combined manufacturing and service sector output – rose to 54.3 in March, up sharply from 44.1 in February, signalling the first upturn in output since last September. Any reading above 50 denotes expansion.
Inflows of new work were broadly stable on the month as looser restrictions buoyed demand in some sectors, while hopes of a swift economic recovery pushed business confidence to the highest since mid-2012.
However, some respondents noted that the remaining lockdown measures were still stifling sales in a number of sectors.
Across the 12 monitored UK areas, all nine English regions and Wales posted growth, while Northern Ireland registered a modest decline.
Malcolm Buchanan, chairman of the Scotland board at Royal Bank of Scotland, said: “The end of the first quarter saw a return to growth for the Scottish private sector economy. Output rose for the first time in six months, and solidly, while inflows of new work neared stability as looser lockdown measures provided a boost to many firms.
“Supply chain issues, shortages, Brexit and the pandemic were all attributed to greater inflationary pressures, however, highlighting that the recovery may well bring with it higher prices due to ongoing logistical constraints.
“Nonetheless, business confidence hit a fresh record high in March, with companies confident of a robust economic recovery as measures ease.”
The latest data highlighted a further decrease in staffing levels at Scottish firms. Panellists attributed the fall mainly to the non-replacement of voluntary leavers due to the pandemic, although there were some mentions of layoffs and redundancies.
RBS stressed that the rate of job shedding was the slowest since February last year and only fractional overall.
The level of outstanding business at Scottish companies continued to fall during March, amid reports that Covid regulations and muted sales had allowed firms to direct resources to unfulfilled orders. The rate of backlog depletion was the slowest in the current 16-month sequence of falls and only marginal, however.