Fall in Scottish business confidence

Business activity declined across Scotland’s private sector for a second successive month in January, according to the latest Royal Bank of Scotland PMI.

Output expectations were also pared back, with optimism easing to a 21-month low.

The seasonally adjusted headline PMI posted 49.2 in January, a fraction below December’s print of 49.3.

As was the case in December, the downturn was broad-based across both manufacturing and service sectors.

Anecdotal evidence indicated that heightened uncertainty and faltering consumer confidence had contributed to lower activity levels.

Of the 12 monitored UK areas, four recorded lower output in January and only London observed a faster decrease than Scotland.

Latest survey data signalled falling demand in Scotland, but the sector split revealed the drop was driven by manufacturers, as service providers recorded mild growth.

According to goods producers, order intakes fell as a result of diminished client demand.

Uncertainty was also mentioned by panellists as a factor impacting order book volumes.

At the UK level, private sector new order intakes decreased modestly and at a quicker rate than Scotland.

Malcolm Buchanan, chairman, Scotland Board, Royal Bank of Scotland, said: “While the UK as a whole approached near-stagnation in January, Scotland was one of four UK areas where output declined. In fact, the contraction north of the border was only outpaced by that seen in the capital.

“Scotland’s manufacturing sector drove the downturn, with economic uncertainty and weak consumer confidence cited by surveyed businesses.

“The knock-on effect was a paring back of business optimism, as expectations hit their weakest in almost two years.”

Malcolm Buchanan, chairman, Scotland board, Royal Bank of Scotland.