Scotland near top of UK table for job creation

While private sector economic growth in Scotland slowed between August and September, with the business activity index declining from 52.7 in August to 51.2 last month on a seasonally adjusted basis, the rate of decline in manufacturing output eased significantly to be only fractional. A cooling of services expansion drove the overall slowdown in Scottish private sector growth last month.

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The business activity index measures combined manufacturing and services output, with a reading above 50 signalling expansion.

Royal Bank, part of NatWest, noted growth in private sector employment in Scotland last month was driven by services firms, with the manufacturing workforce “broadly stable”.

Only Northern Ireland and north-east England saw faster private sector employment growth than Scotland last month, among the 12 nations and regions of the UK.

And half of the nations and regions recorded a decline in employment in September.

Royal Bank said “The labour market remained a strong point for the Scottish private sector. Outstripping the UK-wide average, the rate of job creation hit a 16-month high and signalled a sharp rise in staffing levels. Growth was driven by services firms as manufacturing employment was broadly stable.”

Scotland was ranked eighth out of the 12 nations and regions of the UK in terms of its rate of expansion of business activity in September, ahead of the West Midlands, east of England and Yorkshire & Humber, which recorded weaker growth, and Wales, which experienced a contraction.

Northern Ireland was top of the private sector economy growth table last month.

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Sebastian Burnside, chief economist at Royal Bank of Scotland, said: “September’s growth tracker report showed greater variation in performance across the UK’s nations and regions compared to the situation in August when activity rose universally.

“Output still increased in almost all places, but at one end of the scale there was strong and accelerated growth in Northern Ireland and at the other end was a decline in activity in Wales.”

He added: “At the same time, we saw some divergence in labour market trends, with only half of the 12 nations and regions recording a rise in employment in September, down from 10 in August. It was a similar picture for business confidence, which, whilst generally remaining positive, decreased in just over half of cases.”

The survey shows a sharp fall in new orders for Scottish manufacturers in September, indicating continuing challenges even though the decline in activity in this sector eased to be only marginal last month.

Judith Cruickshank, who chairs Royal Bank’s Scotland board, said: “Scotland wrapped up the third quarter on a positive note. Sustained growth in new business inflows enabled firms to increase their activity levels, although the pace of growth slowed. Notably, hiring activity surged, with job creation reaching its highest level since May 2023. Expansions in new business, activity, and employment were driven by service firms, while manufacturers experienced broadly stable output and jobs but a sharp fall in new orders.”

She added: “The steeper decline in factory orders indicates more challenges for the Scottish manufacturing sector in the coming months. The uncertain political and economic landscape will also act as headwinds to growth, leading the Scottish private sector to increasingly depend on its service firms to drive the economy forward in the coming year. However, price pressures remained on an easing path, with cost burdens rising at the weakest pace in 43 months.”

A separate survey of business leaders published today by the Institute of Chartered Accountants in England and Wales shows confidence in Scotland has declined slightly but “remains high and broadly in line with the UK average”.