Private sector output speeds up at start of 2017

Scottish private sector output strengthened in January, with new business levels expanding at the fastest pace for 20 months, figures from the Bank of Scotland's latest purchasing managers' index (PMI) shows today.

Manufacturers were behind the rise in business activity last month. Picture: John Devlin

However, the weakness of sterling intensified imported cost pressures, sparking the sharpest rise in business selling prices since February, 2011.

The overall PMI, embracing manufacturing and services, rose to 51.2 last month, up from 50.7 in December, where any figure above 50 denotes growth.

Scottish manufacturers were behind the rise in business activity, with firms raising production at the quickest pace in nearly three years, while the services sector held the same level of output as the previous month.

Overall new business growth hit a 20-month high. Nick Laird, regional MD of Bank of Scotland commercial banking, said it was a “promising” start to 2017, but that selling prices were likely to continue upwards.

It comes as UK inflation in January is expected to have come within a whisker of the Bank of Enland’s mid-term inflation target when official data is published tomorrow.

The City expects inflation to have risen to between 1.8 and 1.9 per cent, from 1.6 per cent in December, driven by increased food and petrol prices.

Howard Archer, UK economist at IHS Global Insight, said retail sales figures, also out this week, will show consumers spending less as “rising inflation squeezes purchasing power”.

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Meanwhile, research published today shows that mid-sized businesses have created nearly 80,000 jobs in Scotland over the past five years, putting into the shade the growth of smaller and larger companies.

Since 2011, employee numbers in Scottish mid-sized businesses have jumped 23 per cent to 414,000 from 336,000, says the report from business advisory firm, BDO.

In contrast, jobs in Scotland’s small businesses have lifted 11 per cent to 97,000, while workforces in large businesses have fallen 15 per cent to 480,000 from 568,354.

Martin Gill, head of BDO in Scotland, said the figures showed “high-growth mid-sized businesses are the backbone of the Scottish economy”.

Gill said that the sector was a powerful Scottish economic contributor, “yet because they are so hard to define, they are overlooked and undervalued”.

He added that “with Brexit looming” the government need to engage more with mid-sized companies.

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