HEIGHTENED uncertainty and faltering consumer confidence contributed to a second consecutive monthly decline in Scotland’s private-sector economic output in January, as Brexit looms, a survey reveals.

Royal Bank of Scotland’s survey follows a raft of other economic indicators signalling Brexit uncertainty, including fears of a no-deal exit, is taking a heavy toll on the economy north of the Border and across the UK.

Scottish Chambers of Commerce’s latest survey, published last week in conjunction with the University of Strathclyde’s Fraser of Allander Institute, shows the confidence of manufacturers in Scotland fell at the fastest pace since 2012 in the fourth quarter of last year.

And the latest surveys of the UK manufacturing, construction and services sectors from the Chartered Institute of Procurement & Supply signal economic stagnation at the start of 2019, with Brexit cited by CIPS as a key driver of the weakness.

Although Scottish manufacturing and services output both declined in January, employment rose in both sectors, according to Royal Bank’s PMI (purchasing managers’ index) report.

The fall in Scottish private-sector output was the second-sharpest among the UK nations and regions, and the fastest for nearly two-and-a-half years, with only London suffering a steeper drop.

Scotland and London voted to stay in the European Union in the June 2016 referendum.

The business activity index for Scotland fell from 49.3 in December to 49.2 in January on a seasonally adjusted basis, remaining stuck below the level of 50 deemed to separate expansion from contraction. The activity index for the Scottish manufacturing sector was 47 in January, signalling a sharp decline in output. The services activity index was 49.6, indicating a marginal fall.

The London business activity index was 48, pointing to the sharpest decline of output in the UK capital’s private-sector economy for two-and-a-half years.

Nick Stamenkovic, economist at Royal Bank, said “Brexit jitters” had caused a “sharp fall-back” in output and a “paring-back” of employment in London.

Scottish companies recorded a second straight monthly fall in new business in January, as new manufacturing orders dropped at the sharpest pace for two-and-a-half years, the PMI report shows.

Royal Bank said: “Weak consumer confidence, Brexit-related uncertainty and slowing demand contributed to the fall in new business, according to panel members.”

Scottish companies’ confidence about the prospects for increased business activity on a 12-month time horizon, while still signalling expectations of growth, was at its lowest for nearly two years, with Royal Bank observing “Brexit uncertainty impacting expectations”.

Among UK nations and regions, only five recorded a rise in employment in the private sector economy in January and seven posted a decline.

Mr Stamenkovic said: “What is significant outside Scotland is we are seeing increased signs of labour-shedding. That is a potential warning sign going forward.”

He meanwhile highlighted increased global uncertainty.