SCOTLAND’s private-sector economy returned to growth in January, recording its strongest expansion for 14 months as services output rose and manufacturing contracted at a slower pace, a survey shows.

Of the 12 nations and regions of the UK covered by Royal Bank of Scotland’s PMI (purchasing managers’ index) report, Scotland turned in the sixth-best performance. However, its growth was adrift of that achieved by the UK as a whole.

Royal Bank chief economist Sebastian Burnside said: “I think this is a strong response to the changing environment. All eyes really are on whether the economy shows a bounce into the start of 2020…This is definitely at the stronger end of what we had hoped to see.”

Scotland and London had, in December, been the only two of the 12 areas of the UK covered by the survey to avoid decline. The private-sector economy in Scotland stagnated in December, while London recorded expansion.

The latest output index for Scotland, a measure of combined manufacturing and services sector activity, rose from the 50 no-change mark in December to 52 in January on a seasonally adjusted basis to signal modest growth. The output index for the UK as a whole rose to 53.3.

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Scottish companies achieved an overall rise in new business in January, following a contraction in December.

And companies north of the Border recorded a marginal rise in overall employment last month.

Scottish companies were at their most optimistic since March 2019 about the prospects for increased activity on a 12-month horizon. However, overall optimism among companies in Scotland was nevertheless lower than in any of the other 11 nations and regions covered by the survey. In December, companies in Scotland had been more upbeat about prospects than those in Northern Ireland.

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The services sector in Scotland achieved an acceleration in growth in January, as it recorded an eighth consecutive month of expansion. The Scottish manufacturing sector last month contracted at the slowest pace in its current eight-month run of decline.

Malcolm Buchanan, chair of Royal Bank’s Scotland board, said: “The Scottish private sector recorded a modest increase in business activity during January, with the headline business activity index reaching a 14-month high, driven partly by a renewed rise in new business. That said, the uptick remained historically subdued and softer than that seen across the UK as a whole.”

He added: “Services recorded a quicker increase in activity, whilst the manufacturing segment remained weaker. Positively, firms’ output expectations for the coming 12 months strengthened in January, with respondents linking confidence to a clearer outlook and hopes of improved demand conditions.”

London last month achieved the fastest growth of the areas covered by the PMI survey, followed by the East of England, the South-East, East Midlands, Wales and then Scotland. Northern Ireland and North-East England recorded contraction.

The UK economy is estimated to have stagnated or contracted in the fourth quarter of last year, with figures in January showing a 0.3 per cent month-on-month fall in gross domestic product in November.