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Recruitment in private sector hits record high

PRIVATE-sector companies in Scotland have expanded employment at the fastest rate since 1998 and confidence among small Scottish firms has also soared, according to reports published today.

DEMAND: Record expansion of the dominant services sector has contributed to the rise in employment. Picture: Chris James
DEMAND: Record expansion of the dominant services sector has contributed to the rise in employment. Picture: Chris James

The seasonally adjusted headline Bank of Scotland PMI (Purchasing Managers' Index) was measured at 56.2 in February, down slightly on the 57.2 reading for January.

The slowdown came in spite of an increase in output from Scotland's combined manufacturing and services sector.

February's decline, attributed to slower growth in goods production than during the previous month, came as the dominant service sector expanded at its most marked rate in four months.

The February report was marked by private-sector employment ­growing at its fastest in the survey's history, as firms in both the manufacturing and services sectors took on staff in February.

The growth was driven by the services sector, with staff hired to help companies handle workloads and in anticipation of activity continuing to grow in future.

Scottish firms reported an increase in their backlog of work for the ninth straight month in the February survey.

A sharp increase in new work secured by services firms powered underlying growth in the private sector, which was linked to increasing confidence and growing momentum in the housing sector.

The workload rise came amid rising cost pressure facing services firms, fuelled by increased demand, with the survey's input prices index rising to 60.8 in February from 58.7 the month before. Higher salaries were cited by panel member reports as the single biggest inflationary pressure, most acutely in the travel, tourism and leisure sectors, although rising food and fuel prices were also noted.

Rising demand, meanwhile, was found to have encouraged firms to increase their prices at the highest rate since July 2011.

The index for the average prices charged by Scottish firms increased to 53.7 in February, up from 51.9, with the data showing increases in factory gate prices and service sector tariffs.

But manufacturers reported a disappointing month on the export front, with new export orders falling for the third time in four months. The reversal came after the marginal gain made in February.

Donald MacRae, chief economist at Bank of Scotland, said: "February's PMI showed the private sector of the Scottish economy continuing to demonstrate strong growth.

"The rise in employment was the steepest in 16 years of the survey, while the improvement in new work was particularly strong among service businesses.

"The PMI for the last five months suggests the Scottish economy entered the spring of 2014 with ­sufficient growth momentum to have regained the peak level of output last achieved in mid-2008 before the recession."

Meanwhile, a separate report out today has found confidence among small Scottish businesses has risen to match the UK average.

The Voice of Small Business Index, from the Federation of Small Businesses (FSB), showed confidence among members rose in the first quarter of this year to the highest level since the date series began at the start of 2010.

The index measured +36 points in the most recent quarter, up 15 points on the previous measurement, putting it slightly ahead of the UK average of +35.7 points.

The report disclosed a net balance of 18% of small Scottish firms expected profits to rise in the next quarter, with a balance of 31% expecting turnover to increase.

Andy Willox, Scottish policy convenor at the FSB, said: "It is great news that Scottish small businesses are now as bullish as their counterparts elsewhere in the UK.

"We need to turn this vigour into growth and jobs - and we must see this trend continue for the remainder of the year. As trading conditions improve, it is vital that businesses are ready to cope with rising demand."

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