Scotland’s private sector economy grew last month at its fastest pace since April 2023, with the advance driven by services and manufacturing continuing to contract.

Royal Bank of Scotland, publishing its latest PMI (purchasing managers’ index) report today, notes that the difference between the performance of the services and manufacturing sectors north of the Border is the greatest in 26 years of data collection.

Scotland achieved the second-fastest growth in employment among the 12 UK nations and regions in April, behind only Northern Ireland, the survey shows. It was the 15th consecutive month in which employment in Scotland’s private sector economy has risen.

The headline business activity index for Scotland, which measures the month-on-month change in the combined output of the services and manufacturing sectors, rose from 53.6 in March to 53.8 in April on a seasonally adjusted basis. The 50 mark is deemed to separate expansion from contraction.

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Firms in Scotland remained positive about the prospects for increased activity on a 12-month horizon, Royal Bank noted.

However, the bank observed that the degree of confidence slipped to a five-month low, and was “muted” by historical standards.

The bank pointed out that, in spite of the overall positive reading, Scotland was the least optimistic of the 12 UK nations and regions on the prospects for increased business activity.

Commenting on continued growth in employment in Scotland in April, Royal Bank said: “Private sector companies across Scotland continued to raise their staffing levels in April, with expansions now noted for the 15th straight month. Moreover, the rate of job creation quickened from March's six-month low and was solid overall. Again, job creation was centred at service firms, although the downturn across manufacturers moved closer to stabilisation.”

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Sebastian Burnside, chief economist at Royal Bank, highlighted the fact that only six of the 12 UK nations and regions had seen private sector employment rise in April.

He said: “Most areas of the UK are enjoying a revival in business activity, with growth even accelerating in most cases in April.”

However, Mr Burnside added: "Whilst there are generally positive signs for activity and demand, hiring remains somewhat lacklustre. Just half of the 12 nations and regions monitored by the survey saw employment rise at the start of the second quarter, which equated to broadly no change at the UK level.

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"Businesses appear to be taking a more cautious approach to hiring, at a time when costs are continuing to rise relatively sharply, not least due to staff pay increases.”

Judith Cruickshank, who chairs Royal Bank’s Scotland board, said: “Scottish private sector companies signalled a solid start to the second quarter, with expansions now noted in each month of 2024. Activity rose at a quicker pace as growth in new business was sustained.

“However, as has been the case since the current expansion in activity began, growth was limited to service providers, while the manufacturing sector remained in contraction territory. Moreover, inflationary pressures also quickened notably, with service firms being the main reason behind the stickiness in prices and charges."