Private sector firms register solid performance in June

There were some signs of optimism for the Scottish private sector in June as firms registered another solid performance, according to a new report.

Scottish companies recorded the third straight monthly increase in the level of new business in June, citing the relaxation of Covid-19 restrictions, improved client confidence and firmer demand conditions as drivers of the latest upturn.

The rate of growth slowed from May’s survey high, but was still the second-quickest since September 2013 and rapid, according to the latest Royal Bank of Scotland Purchasing Managers’ Index (PMI).

Inflows of new work rose steeply again, while sustained capacity pressures led firms to take on additional staff for the third month in a row.

However, input prices faced by Scottish private sector firms continued to soar during June, with the rate of inflation the fastest since February 2011.

Respondents attributed greater costs to material shortages, price hikes at suppliers, Brexit and higher fuel and utilities prices.

Malcolm Buchanan, chairman of the Scotland Board at Royal Bank of Scotland, said: “June data showed some signs of optimism for the Scottish private sector, as the easing of lockdown restrictions and improved consumer confidence continued to invigorate growth.

“The rates of increase in both business activity and new work slowed only slightly from May’s respective series records and remained marked.

“Inflationary pressures are a key concern, however, as material shortages and greater fuel and utilities fees continued to put severe upward pressure on input costs and, subsequently, selling prices.

“Nonetheless, the private sector remains in a good position as we enter the third quarter of the year.

“Growth showed little sign of slowing notably in June, and firms remained among the most confident on record of higher activity in the coming 12 months.”

Private sector employment across Scotland continued to rise during June, extending the current sequence of increases to three months, with panellists attributing the latest upturn in staffing levels to greater output requirements.

While the rate of job creation slowed from May’s peak, it was still the second-quickest on record.

The services sector saw a slightly quicker rate of job creation than manufacturing.

The seasonally adjusted headline Royal Bank of Scotland Business Activity Index – a measure of combined manufacturing and service sector output – was 58.4 in June, falling from May’s survey record of 61.5, with a reading of 50 indicating no change.

The report also found that in response to greater input costs, Scottish private sector firms increased their average charges for the eighth month running during June.