Bussiness
Scottish business activity continues to fall in November
The latest Royal Bank of Scotland PMI figures have signalled a solid reduction in Scottish private sector activity in November.
At 47.1, up from 46.5 in October, the Scotland Business Activity Index posted below the crucial 50 mark for the third month running.
The decline in private sector activity reflected an accelerated fall in manufacturing output and a weaker reduction in services activity. The downturn in output was propelled by a stronger reduction in new orders, as underlying demand conditions worsened.
Nonetheless, firms continued to increase their workforce numbers in November and at the strongest pace in six months. This in turn led them to further reduce backlogs.
Inflows of new business fell solidly across Scotland in November, thereby extending the current run of decrease to five months. Survey panellists reported that waning demand and an uncertain economic environment weighed down on sales, especially across the manufacturing sector.
Scottish private sector firms generally anticipated growth in business activity over the coming 12 months, citing increased marketing plans and hopes of stronger demand, as well as stable interest rates and lower inflation. That said, confidence remained historically muted and much weaker than the UK-wide average.
Despite shortfalls in demand, Scottish firms remained keen to raise their workforce numbers in November, with expansions noted in each of the past 10 months. In fact, the rate of job creation quickened to a six-month high, with successful replacement of leavers, expansion plans and expectations of growth in new orders underpinning the latest uptick.
Scotland also recorded the strongest rise in employment of all the 12 monitored UK regions and nations.
A sustained decline in new orders led to a further fall in backlogs across Scotland in November. Firms also noted that improved availability of raw materials and the intake of additional staff drove the reduction in the amount of work outstanding. Work-in-hand has now fallen in 17 of the past 18 survey periods.
Cost pressures edged up slightly in November, thereby stretching the current run of inflation to three-and-a-half years. The pace of inflation was rapid and historically elevated, albeit much softer than the record rates observed last year. Higher prices from suppliers and the war in Ukraine was said to have fed through to greater costs for input.
Of the 12 monitored UK regions and nations, only London recorded a faster rate of input cost inflation than Scotland.
Scottish private sector companies recorded a sharp rise in selling prices during November. While the rate of output charge inflation was the softest in three months, it remained historically strong.
A steep increase in charges was also reported across the UK, with the rate of growth slightly stronger than that seen in Scotland.
Judith Cruickshank, chair of the Scotland board at RBS, commented: “Businesses across Scotland struggled to raise their activity as waning demand and growing market uncertainty hampered sales in November.
“Moreover, with expectations remaining historically muted, the downturn could continue into the new year.
“However, despite the setbacks private sector companies are facing, the labour market remains resilient,” she continued, adding: “Employment levels expanded for the 10 month running in November.”
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