THE Scottish private sector economy stagnated in April, following two months of contraction, but employment fell at the fastest pace since November 2010, a survey has revealed.

Bank of Scotland’s latest PMI (purchasing managers’ index) report, published today, shows that services sector output north of the Border was unchanged between March and April. Manufacturing showed only a marginal contraction, after a sharp fall in output in March, but this sector experienced an acceleration in the rate of decline of new export orders.

The seasonally-adjusted output index for the Scottish private sector economy rose to 50 in April from 48.5 in March - to signal stagnation rather than contraction.

The corresponding output index for the UK as a whole dropped from 53.6 in March to 51.9 in April, signalling a sharp slowdown in growth to only a very modest rate.

Bank of Scotland said anecdotal evidence from the survey linked falling headcounts in the manufacturing sector north of the Border to the decline in the oil and gas industry.

The survey signals that, in Scotland, the rate of decline in employment was faster in the services sector than in manufacturing.

Bank of Scotland said: “Job-shedding was registered in Scotland’s service sector again in April, continuing a trend which has been evident in each of the past four months. Moreover, the rate of job-cutting accelerated to the fastest since January 2011 and was strong in the context of long-run historical data.”

The survey shows that, while increases in output were recorded by business services and financial intermediation companies in Scotland, a “solid contraction” was registered by travel, tourism, and leisure groups.

The report signals only a marginal increase in new business in the Scottish services sector last month.

New orders in the Scottish manufacturing sector fell for an eighth consecutive month. The rate of decline of new orders in the sector slowed in April. However, manufacturers’ new export orders dropped at a faster rate last month than in March.

According to the survey, the Scottish private sector economy recorded a 16th consecutive month of falling backlogs of work, suggesting there continues to be spare capacity in the economy.

Alasdair Gardner, Bank of Scotland’s managing director for commercial banking north of the Border, said: “Stabilising business conditions were the theme of April’s survey data, which is encouraging news for Scotland’s private sector after an intensifying downturn over the previous few months.

“However, firms still reported declines in their backlogs of work levels and employee numbers, suggesting that the economy could be poised to return into contraction territory in the near future.”

The output index for the Scottish services sector edged up from 49.6 in March to 50 in April, on a seasonally-adjusted basis. The manufacturing output index jumped from 44.6 to 49.7, a level that signals only a marginal rate of decline.

The PMI report shows that Scottish private sector companies, overall, raised their output prices in April for the first time in nine months.

Official figures published last month showed the Scottish economy grew by only 0.2 per cent in the fourth quarter of last year, as the oil and gas sector’s woes continued to weigh.

Figures published by the Office for National Statistics late last month showed UK growth slowed to just 0.4 per cent in the first quarter of this year from an already below-trend 0.6 per cent in the final three months of 2015.

And fears that UK growth could be stalling were fuelled last week by news of a sharp slowdown in expansion of the dominant services sector in April to its weakest pace since February 2013.

The Chartered Institute of Procurement & Supply (CIPS), revealing the services sector slowdown in April, signalled that uncertainty ahead of the June 23 referendum on UK membership of the European Union had been among the factors weighing on activity in April.

Separate surveys from CIPS have shown that the UK manufacturing and construction sectors last month also turned in their weakest performances since 2013. The impact of UK Government spending cuts was also flagged as a factor weighing on growth.