The Scotsman

Unparallel­ed dive sees Scottish firms fare worse than UK

● Biggest drop in output ever recorded ● Bank boss warns over pace of recovery

- @RBS By PERRY GOURLEY businessde­sk@scotsman.com

Scottish businesses suffered an unparallel­ed downturn in activity last month and fared worse than the UK as a whole, according to a bleak report today.

The latest Royal Bank of Scotland’s PMI report also showed that the service sector recorded a quicker decline thanmanufa­cturing,although both sectors saw the most marked reductions in activity on record as the full impact of lockdown measures was seen.

The headline business activity index – a measure of combined manufactur­ing and service sector output – fell from 29.7 in March to a fresh low of 10.7 in April and signalled the most substantia­l contractio­n in private sector activity in the 22-year survey history.

The combined drop in the index from February was 39.4 points.

Malcolm Buchanan, chair of RBS’S Scotland board, warned that, although there is now some discussion of an exit plan from the quarantine restrictio­ns, ”it is unlikely that the economy will recover quickly from such a severe downturn”.

Unsurprisi­ngly, private sector firms recorded a backto-back reduction in total new business during April, with the rate of contractio­n also accelerati­ng during the month.

The fall in Scotland was part of a wider UK trend in April. New business dropped at the quickest pace on record, although the fall was softer than that seen in Scotland.

The report also shows the impact on workforce numbers, with the rate of job cuts in Scotland the quickest recorded by the survey.

However, for the first time since January 1999, private sector firms in Scotland highlighte­d a reduction in input prices during April, with lower fuel, oil and staff costs.

At the same time, average selling prices fell for the second month running, with the rate of reduction the quickest on record. According to survey respondent­s, the fall was due to a combinatio­n of lower costs and discountin­g as a result of efforts to attract clients.

The report also shows private sector firms in Scotland remain pessimisti­c regarding activity over the coming 12 months, although sentiment did pick up slightly from March’s low.

Buchanan said the latest data pointed to an unpreceden­ted reduction in private sector activity.

He said: “Incoming new business declined at the most marked rate in over 22 years of data collection, with firms mentioning that demand both domestical­ly and from abroad had collapsed.

“Unsurprisi­ngly, the 12-month outlook for activity remained negative for the second month in a row, amid substantia­l uncertaint­y surroundin­g the economic fallout of the pandemic.”

The RBS PMI report is compiled by IHS Markit from responses to questionna­ires sent to a panel of about 500 manufactur­ers and service providers.

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