Private sector activity in Scotland continued to decline markedly during June, with ongoing coronavirus restrictions stifling demand and disrupting operations, according to the latest Royal Bank of Scotland Purchasing Managers’ Index (PMI) report.

However, the respective seasonally adjusted index registered a record rise on the month to signal a notably softer rate of decline “and indicate that the most severe phase of disruption had passed.”

The level of positive sentiment also improved notably.

The seasonally adjusted headline Royal Bank of Scotland Business Activity Index — a measure of combined manufacturing and service sector output — registered 37.1 in June to signal a much softer rate of contraction compared to May’s figure of 21.1.

Malcolm Buchanan, chair, Scotland Board, Royal Bank of Scotland, 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.”

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

According to panellists, client demand remained muted amid the COVID-19 pandemic.

The report added: “The Future Output Index remained above the 50.0 mark for the second month in a row during June, to signal overall confidence at Scottish private sector firms with regards to activity over the year ahead.

“Moreover, the level of positive sentiment improved notably, with anecdotal evidence linking confidence to looser lockdown restrictions and hopes of an economic recovery once the pandemic is under control.

“Sentiment remained slightly subdued in the context of historical data, however.

“Private sector firms in Scotland continued to cut workforces at a marked rate in June, amid reports of further redundancies and lay-offs as a result of the coronavirus pandemic, alongside frequent mentions of the government furlough scheme.

“The rate of job shedding was the softest for three months, however.

“Workforce numbers also dropped further at the UK level during June. The rate of reduction at the UK level was slightly softer than in Scotland.”