Bulging order books boost Scottish firms

Businesses in Scotland last month saw the highest jump in output for almost a year, according to a Royal Bank of Scotland (RBS) report out today.

The bank’s latest Purchasing Managers’ Index (PMI) report said growth in business activity was underpinned by the sharpest expansion in order book volumes for 46 months. The rate of output growth in Scotland was also stronger than that seen Uk-wide .

Sebastian Burnside, chief economist at RBS, said the pick up in activity was “very welcome after three years when growth has been in short supply”.

Although it was the service sector which was currently leading the charge, he said the rising oil price should also help boost engineering activity.

He cautioned that for many firms, rising energy and transport costs look likely to squeeze margins over the second half of the year, but added that a “growing market should help make that an easier pill to swallow”.

To cope with demand pressures, the report said businesses recruited extra staff at a solid pace in May with the rate of job creation accelerating to a 41-month high.

However, profit margins remained under pressure, with input prices rising at a substantial rate. Increased operating expenses were primarily linked to higher energy, food and labour costs.

While inflation slowed in the manufacturing sector, service providers saw a faster rise. Firms responded by raising output charges for the 22nd consecutive month. 0 ‘Rapid improvement’ – RBS’S Sebastian Burnside