By Ian McConnell

GROWTH in Scottish private-sector output was only “marginal” last month as the economic recovery lost momentum, while job-shedding remained sharp and new business fell, a key survey shows.

Although nine of the 12 nations and regions of the UK show a slowing of private-sector growth in September in Royal Bank of Scotland’s latest PMI (purchasing managers’ index) survey published today, Scotland recorded the weakest expansion last month. In August, Scotland’s growth rate had been significantly ahead of that in Northern Ireland and Wales but adrift of expansion in all of the English regions.

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The private-sector economy north of the Border had seen its output rise in August at the fastest pace in more than six years, as the recovery following the plunge in activity triggered by the coronavirus pandemic picked up momentum.

However, Royal Bank’s latest survey shows the business activity index for Scotland tumbled from 55.8 in August to 51.2 last month on a seasonally adjusted basis, only slightly above the level of 50 deemed to separate expansion from contraction.

The rate of decline in employment in Scotland last month was unchanged from that in August, and remained sharp overall.

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However, it was not as bad as the rates of job-shedding in Northern Ireland, London, Wales, Yorkshire & Humber, and the West Midlands.

Employment has now fallen in Scotland for eight consecutive months.

Royal Bank said of the Scottish employment picture: “Anecdotal evidence linked the latest reduction to Covid-19 related redundancies and the non-replacement of voluntary leavers.”

Scotland and Northern Ireland were the only parts of the UK to see a decline in new business in September. Companies north of the Border had recorded a solid increase in new business in August, the first rise in six months.

Royal Bank noted companies in Scotland had attributed the renewed decline in new business in September to “weak client demand” resulting from “stricter lockdown measures”.

Overall, companies in Scotland continued to project a rise in business activity on a 12-month time horizon.

However, their degree of optimism in this regard was the weakest for four months.

Royal Bank said this reflected “concerns about the introduction of more stringent lockdown measures and the timeliness of any recovery”.

Malcolm Buchanan, who chairs Royal Bank’s Scotland board, said: “The latest PMI data highlighted slower growth of the Scottish economy, with business activity rising only marginally overall. Meanwhile, inflows of new work fell following an uptick in August, with survey respondents citing weak client demand due to stricter lockdown measures.. These measures, although necessary, also dented firms’ confidence during September. Sentiment was still positive overall, but slipped to a four-month low. Meanwhile, job-cutting continued, with the rate of reduction remaining marked.”

However, he added: “Nonetheless, data highlighted a good performance in the context of the rapid contractions seen in the spring. Weak client demand is a concern, but unsurprising with lockdown measures tightening. Hopefully, as in August, once the pent-up demand is released, the sector will move full throttle towards a recovery.”