By Ian McConnell

SCOTLAND’S private-sector economy contracted in October amid Brexit-related uncertainty, as manufacturing output dropped at its fastest pace in nearly nine years and employment fell at its sharpest rate in a decade, a survey shows.

The fall in Scottish private-sector output recorded in the latest PMI (purchasing managers’ index) report from Royal Bank of Scotland was the first in five months. It followed stagnation in September.

Royal Bank’s business activity index for Scotland, a combined measure of manufacturing and services sector output, fell from 50 in September to 49.6 last month on a seasonally adjusted basis.

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Services sector growth slowed to a marginal rate, as manufacturing contracted at its fastest pace since December 2010, a month in which Scotland was hit by heavy snow and freezing temperatures. Manufacturing output has now fallen for five straight months.

New business for Scottish companies showed an overall fall for a third consecutive month and the drop was the sharpest since July 2016, in the immediate wake of the Brexit vote.

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Royal Bank said: “Survey respondents frequently attributed falls in output and new business to continuing Brexit uncertainty.”

It noted that new business fell in the Scottish services sector for the first time since May. In the manufacturing sector in Scotland, new business has fallen for 14 straight months.

Scottish companies were in October at their least-optimistic since July 2016 about the prospects for increased activity on a 12-month horizon.Fears of a no-deal Brexit were to the fore during much of October.

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Malcolm Buchanan, who chairs Royal Bank’s Scotland board, said: “For the first time since May, Scotland’s private sector registered a deterioration in operating conditions…following a stagnation of business activity in the previous survey period. The manufacturing sector drove the downturn, reporting a fifth consecutive monthly decline in output that was the fastest since the snow-related dip in December 2010, while growth in services eased.

“October data also highlighted the fastest fall in new business for over three years, to signal further weak demand conditions amid uncertainty. Employment across Scotland’s private sector continued to shrink...with the rate of job-shedding the fastest for more than a decade.”

He added: “A murky outlook towards activity growth over the next year persisted, with the level of sentiment across the Scottish private sector the weakest since the aftermath of the EU referendum in July 2016.”

The UK private-sector economy contracted for a third consecutive month in October and is enduring its toughest spell since early-2009, while job losses are among the “fiercest” in a decade, a senior economist warned last week.

Chris Williamson, chief business economist at IHS Markit, was commenting after a survey from the Chartered Institute of Procurement and Supply showed that UK services sector output stagnated in October, having declined during the previous month. Other surveys published this month by CIPS, compiled by IHS Markit, showed declines in manufacturing and construction activity in October.