Companies’ expansion at 5-month low amid shortages

BUSINESS expansion has slumped to a five-month low amid spiralling costs and pessimism among Scottish firms.

The level of outstanding business at companies rose last month, but they faced shortages of staff and materials.

This led to a backlog of uncompleted jobs as materials being processed neared ‘stagnation’, figures show.

Delays among goods producers rose and the service industry experienced its first fall in business since March.

Cost increases facing firms were also recorded for the 16th month running.

Royal Bank of Scotland analysts blamed the rises on material, fuel and wage costs, logistical issues, Covid-1 and Brexit.

The rate of cost increases was the fastest recorded since July 2008, with inflation reaching a 13-year high.

Malcolm Buchanan, chairman of the Royal Bank of Scotland’s Scotland board, said: ‘Scotland’s private sector remained on a growth footing in September, with business activity rising further amid a sustained uplift in inflows of new work.

‘The rates of expansion slowed to a five-month low, however, as some momentum was lost due to fresh reductions in both output and order book volumes at goods producers.’

Figures collected for the bank by IHS Markit between September 13 and 28 showed that last month firms raised their average charges for the eleventh consecutive month. This was attributed to companies passing on greater costs to clients.

But inflation charges also increased more quickly than they had since November 1 .

Mr Buchanan added: ‘Companies registered severe inflationary pressures amid greater fuel, material and staff costs, as well as shortages and logistical issues. The third quarter as a whole, nonetheless, saw one of the quickest expansions of the private sector on record.’

‘Inflationary pressure’