Scotland's private sector faces 'challenging' times as activity slumps

Scotland’s private sector downturn continued last month with job cutting taking place at a “marked” rate, according to the latest Royal Bank of Scotland snapshot.

Malcolm Buchanan, chair, Scotland board at Royal Bank of Scotland, which publishes the report. Picture: Gary Baker

The bank’s business activity index – a measure of combined manufacturing and service sector output – registered 37.1 in June, an improvement on May’s figure of 21.1 but still well within contraction territory.

Private sector firms reported a further reduction in total new orders during June, extending the current sequence of contraction to four months.

Businesses continued to cut workforces at a marked rate last month, amid reports of further redundancies and lay-offs as a result of the coronavirus pandemic. The rate of job shedding was the softest for three months, however.

The future output index remained above the 50 mark for the second month in a row during June, to signal overall confidence at private sector firms with regards to activity over the year ahead.

Malcolm Buchanan, chair, Scotland board at RBS, said: “Business activity across the Scottish private sector continued to decline markedly during June, with total new orders also falling sharply again.

“That said, the rates of decline eased significantly, with both indices recording record month-on-month rises from May, as looser restrictions allowed parts of the economy to restart.

“Scottish services firms were again worse-affected, with the reductions in both activity and new orders notably faster than those seen for their goods-producing counterparts. With both sectors struggling, private sector employment dropped markedly again amid reports of redundancies and lay-offs.

“The 12-month outlook for activity improved for the second month running in June, with the level of positive sentiment approaching the series average. Nonetheless, with client demand stifled, the short-term outlook for the Scottish private sector remains challenging.”

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