Services sector cuts hit employment

The level of employment in Scotland suffered its first dip for almost four years last month.

The Bank of Scotland’s latest PMI report found that staffing levels north of the border declined in July, largely as a result of job cuts within the dominant services sector.

The Scottish picture was in contrast to the wider UK situation where employment levels continued to grow during the month, albeit at a slower pace than in the year to date.

Some of the survey respondents attributed the losses to internal restructuring efforts as firms looked to rein in costs.

While there was a decline, the report’s authors said the rate at which workforce numbers across Scotland were being reduced was “modest”.

They also found there was spare capacity within the services sector in July with the amount of new business secured down significantly on June.

However, on a more upbeat note, the PMI also reported further growth in output during July, with the country’s manufacturers leading the way.

In comparison to June, the PMI’s headline measure – which combines manufacturing and services output – grew by 1% to 52.2%, the most marked rise since December.

Bank chief economist Donald MacRae said the economy was improving.

“Activity grew in the services sector while manufacturing output showed a welcome return to growth after the contraction of the last three months,” he said.

“New orders rose in all sectors while the pace of decline in new export orders slowed.

“Although employment fell, the Scottish economy continued the recovery from the slowdown in the first quarter of the year. Moderate growth is expected for the rest of 2015.”

BoS chief economist Donald MacRae.