Business monitor suggests private sector growth slowdown in June

Private sector growth slowed down in Scotland last month, the latest version of a business monitor has indicated.

The Royal Bank of Scotland (RBS) growth tracker signalled Scotland’s private sector continued to grow in June but the rate of growth slowed to a five-month low.

Output grew at a weaker rate across Scotland compared with the UK as a whole, RBS said.

The slowdown in private sector output was accompanied by a fresh fall in new business – the first recorded in five months.

Employment rose in the latest survey period, but at the second-weakest rate since the current run of expansion began in February 2023.

However, inflationary pressures continued to subside as cost burdens rose at the weakest rate in 40 months, according to the bank.

Despite easing slightly on the month, projections for the year ahead outlook across Scotland remained optimistic and broadly in line with the long-run, average trend in June.

Businesses were hopeful that demand conditions would improve in the coming months and planned to raise their advertising and investment.

RBS Scotland board chair Judith Cruickshank said: “The Scotland growth tracker signalled modest gains in private sector activity during the latest survey period.

“While the upturn lost momentum, as the service sector observed a notable cooldown in June, the ongoing downturn in the manufacturing sector showed further signs of easing as output was broadly stable, and the downturn in new orders moderated.

“Additionally, private sector companies continued to raise their staffing levels, albeit the latest uptick was fractional overall.

“Price pressures continued to abate as the year progressed, cost burdens rose at the weakest pace since February 2021, and the rate of charge inflation equalled the weakest seen over the same period. Some firms were keen to price competitively in order to generate new sales.”

The tracker is based on a panel of 500 service providers and manufacturers.

Panellists attributed the downturn in new business to reduced client activity and advertising spend, as well as a prolonged high interest rate environment and the General Election.

Scotland went against the UK trend of a sustained rise in new business.

The tracker found growth in Scottish private sector employment lost momentum in June with the number of employees rising only “only fractionally and at the second-weakest rate in 17 months.

Some firms reported success in filling long-standing vacancies, but the wider economic climate and reduced client activity resulted in others lowering their staffing levels.

Across the UK, the rate of job creation was slightly weaker than that seen in Scotland.

Cost burdens rose sharply at Scottish private sector firms in June, this being attributed to increasing costs of raw material and supplier costs.