Scottish firms back in hiring mode as economy recovers

The Scottish private sector economy saw the fastest rate of growth for eight months in April as the recovery continued, new figures reveal.

Firms reported a strong rise in new business as customers responded to a loosening of lockdown restrictions, according to the latest Royal Bank of Scotland (RBS) PMI figures.

Businesses also began taking on additional staff for the first time since January 2020.

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The Business Activity Index - a measure of combined manufacturing and service sector output - rose from 54.3 March to 55.4 in April to signal a back-to-back upturn. The increased demand saw backlogs of work rose for the first time in over two-and-a-half years.

RBS's Malcolm Buchanan said the April figures were further evidence of the economic recovery in Scotland as lockdown measures ease.

However, the rate of growth in Scotland lagged behind the UK average in April. Of the 12 areas covered in the report, only the north east of England saw a slower expansion of new business.

Looking ahead, Scottish companies remain optimistic with regards to output over the next year, although the Future Activity Index dipped slightly from March's record high.

The rate of increase in employment seen in Scottish firms was marginal with new jobs concentrated in manufacturing. Service sector employment meanwhile continued to decrease, although the rate of reduction slowed on the month.

The data for April highlighted a further steep increase in cost burdens facing Scottish firms, with the rate of inflation unchanged since March and the fastest since August 2018.

Price hikes at suppliers, greater utility, wage and material costs, as well as Brexit, were the primary drivers of inflation according to survey panellists.

Both manufacturers and services firms saw a marked rise in costs, although the rate of inflation was “noticeably quicker” for the former.

Malcolm Buchanan, chair of RBS’s Scotland board, described the data as “very encouraging”.

“It suggests the private sector has turned a corner towards recovery. With lockdown measures set to ease further, we should see a sustained rebound in the months to come.”

He said the positive news on employment was “a clear sign that firms are confident of a recovery. Indeed, the year-ahead outlook for activity remained historically elevated”.

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

It is the latest in a series of positive updates on the nation’s economic recovery.

Latest GDP figures for Scotland showed the economy grew in February, boosted by a return to school for younger children.

GDP rose by 0.9 per cent compared with January, ending three consecutive months of falls.

Separate figures from the Office for National Statistics (ONS) showed a slight rise in Scotland’s employment rate over the last quarter.

The data showed the employment rate from December 2020 to February 2021 for those aged 16 to 64 was 74.6 per cent, up 0.2 per cent on the previous quarter.

The unemployment rate for those aged 16 and over remained at 4.4 per cent, no change on the previous quarter.

The ONS figures showed there were 2.56 million people aged 16-64 in employment between December and February, while 120,000 in that age range were unemployed.

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