Scots job creation strongest in UK as downturn eases

Judith Cruickshank of RBS

The latest Royal Bank of Scotland Purchasing Managers Index (PMI) report said the rate of job creation across Scotland was the strongest of all the 12 monitored UK regions and nations.

That’s despite the PMI report indicating a further deterioration across the Scottish private sector at the end of 2023.

“That said, at 49.4 in December, up from 47.1 in November, the Output Index signalled that private sector activity fell at the slowest pace in the current four-month downturn,” said the report.

“The latest decline was centred on the manufacturing sector, while services firms reported a fresh, albeit marginal, rise in activity.

“Moreover, companies raised their staff intakes, with employment rising for the eleventh consecutive month in December.

“Successful replacement of leavers and expectations of growth allowed firms to increase their hiring activity.

“Moreover, the rate of job creation across Scotland was the strongest of all the 12 monitored UK regions and nations.”

The year ended with another monthly contraction in new business across Scotland, with new orders falling continuously since July.

However, the downturn eased and was centred on the manufacturing sector, with respondents citing deteriorating market conditions and higher prices deterring customers.

In contrast, a fresh rise in new work was noted at services providers.

Expectations strengthened in December, with private sector companies across Scotland anticipating a rise in output in 2024.

The degree of confidence was the strongest in seven months and broadly in line with the historical average since 2012.

Optimism largely stemmed from hopes that improvements in markets, as well as increased advertising, new contracts and products would bolster growth in activity.

“December data revealed a rise in employment across Scotland, thereby stretching the current run of growth to 11 months,” added the report.

“Scottish businesses were keen to fill vacant positions and replace leavers. Moreover, hopes of improved demand conditions encouraged some firms to raise their current staffing levels.

“Though the rate of increase eased slightly from November and was modest overall, it was the strongest of all 12 UK nations and regions.

“London and Northern Ireland were the only other UK areas to record higher employment in December.

“Reduced levels of work and sustained growth in employment meant that outstanding business declined for an eighth consecutive month across Scotland’s private sector in December.

“The downturn was the most marked since January 2023 and sharp overall. Some firms also noted that improved availability of materials helped companies to work through backlogs.”

Judith Cruickshank, Chair, Scotland Board, Royal Bank of Scotland, said: “Firms in Scotland recorded a contraction in private sector output during December, with the manufacturing sector weighing heavily on overall performance.

“However, the latest downturn was modest overall and the weakest in four months, in part reflecting a fresh, albeit marginal, expansion in business activity across services firms.

“Employment levels continued to rise, indicating that companies anticipate higher business volumes in the coming months.

“Job creation was also the strongest in the UK. In terms of inflation, input prices rose at the slowest rate in nearly three years and one below the long-run average, although charge inflation remained historically high.”