The Scottish private sector economy approached stagnation in February, growing only fractionally, according to the latest Royal Bank of Scotland Purchasing Managers’ Index (PMI).

However, the report added: “Firms remained confident activity would rise over the coming 12 months during February.

“Panellists linked optimism to hopes of improved demand conditions.

“Moreover, the sentiment strengthened to a 20-month high.”

Malcolm Buchanan, chair, Scotland Board, Royal Bank of Scotland, said:  “The Scottish private sector neared stagnation during February, with only a fractional rise signalled by the headline Business Activity Index, as renewed growth in manufacturing was largely offset by a mild reduction in service sector activity. 

“Meanwhile, overall new business increased only fractionally, amid reports of weak foreign demand and further uncertainty weighing on growth, while some firms responded to softer demand conditions by not filling vacancies, leading to a fall in workforce numbers for the first time in four months. 

“On a positive note, business confidence climbed to a 20-month high, with anecdotal evidence linking optimism to hopes of improved client demand.

“Nonetheless, sentiment in Scotland was the second-lowest across the 12 monitored UK areas, with only Northern Ireland reporting a softer outlook.”