The latest Royal Bank of Scotland Growth Tracker showed a third straight monthly decline in Scottish business activity during June.

However, the data also highlighted a slight uptick in payroll numbers.

The headline Royal Bank of Scotland Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of Scotland’s manufacturing and service sectors – showed 47.6 in June, up from 47.1 in May, to signal a slightly slower reduction in business activity across Scottish private sector firms.

According to anecdotal evidence, the latest fall was due to a weaker economic climate, lower business confidence and reduced intakes of new work.

“Following two consecutive months of job shedding, June data revealed a slight uptick in employment across Scotland’s private sector,” said the report.

“While some businesses decided to take on new hires amid fresh projects and planned expansions, others indicated that the completion of contracts, non-replacement of voluntary leavers and redundancies had dampened overall growth in employment.

“At the same time, while cost increases across Scotland rose at their slowest pace since March, they remained high.”

Judith Cruickshank, Scotland Board Chair, Royal Bank of Scotland, said: “The Royal Bank of Scotland Growth Tracker for June rounded off a challenging second quarter for Scottish businesses. Inflation, while continuing to fall from its peak earlier this year, remains high and continues to drive market uncertainty and demand weakness.

“As such, we again saw a contraction in business activity for the third month in a row. The difficult backdrop also led Scottish businesses to report muted expectations around future activity.

“However, despite these challenging circumstances, Scottish businesses have remained resilient, with private sector employment increasing, albeit only slightly, which contrasted with falls across all other UK regions and nations.

“This suggests that should inflation continue to fall then we may see Scottish business confidence and activity improve in the second half of 2026.”

The report said business sentiment across Scotland’s private sector remained generally positive in June. Firms that expected output levels to rise over the next 12 months often linked this to hopes of improved demand conditions and new project wins.

That said, the degree of confidence ticked up only slightly from May and remained subdued. A number of firms noted that the rising cost of living and market uncertainty had weighed on overall expectations.

With the exception of Scotland, all monitored UK regions and nations registered job losses during the latest survey period.