GROWTH of Scotland’s private sector economy remained robust in October, and overtook expansion in the UK as a whole again, a closely watched survey shows.
However, uncertainty over Brexit played a key part in Scottish companies’ optimism about prospects for higher business activity on a 12-month view falling to its lowest in a year, according to the PMI (purchasing managers’ index) report published today by Royal Bank of Scotland.
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The headline seasonally adjusted output index for Scotland, which measures activity in the manufacturing and services sectors, was, at 53.4 in October, unchanged from the previous month, remaining well above the level of 50 deemed to separate expansion from contraction.
With the UK output index dipping, to signal slower growth, the reading of 53.4 for Scotland meant expansion north of the Border overtook that in the UK as a whole.
Sebastian Burnside, chief economist at Royal Bank, highlighted the fact that Scottish growth had now exceeded that in the UK as a whole in three of the last four months.
Commenting on the latest PMI report findings, Mr Burnside said: “Basically, everywhere other than Scotland has deteriorated. What would normally be a so-so – Scotland’s score the same as it was – that itself is a pretty impressive performance.”
He added: “Scotland’s growth has been a lot stronger and more stable, more resilient, than other parts of the UK, which is particularly pleasing to see at the moment. This is now the third month out of four where the headline growth number is higher than the UK equivalent, so continuing a good run of form there.”
Scottish manufacturing activity, which had dipped in September, returned to marginal growth last month, with this sector’s output index at 50.2 in October. The services sector continues to be the main driver of growth in Scotland, with its output index at 54.2 last month.
The survey shows that growth of new business for the private sector economy in October was faster in Scotland than in any other part of the UK.
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Mr Burnside attributed the drop in optimism about future output to Brexit uncertainty, highlighting in particular companies’ worries over a no-deal outcome as the exit date of next March looms.
He said: “The prospect of no-deal is what has really hit home for most businesses…The possibility of leaving without a deal at the end of March is something that is concentrating people’s emotion much more than it was four or six months ago. I think that is a big part of what is going on.”
Mr Burnside also expressed concern over a lack of investment by companies.
He said: “What we are increasingly concerned about is people investing less, and they are telling us they are investing less. That will make growth harder to come by in future.
“I think that could become a bigger constraint for the economy.”
The survey shows the overall rate of employment growth among privately owned firms in Scotland accelerated to its sharpest pace in four months in October, and was faster than that in the UK as a whole.
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