Scotland's private sector growth slowed in July, a key survey shows, but the country remained in the top half of the 12 monitored UK nations and regions in terms of performance.

The business activity index for Scotland in Royal Bank of Scotland’s latest purchasing managers’ index fell from 53.2 to 51.1 on a seasonally adjusted basis, signalling a slowing of growth but comfortably above the level of 50 deemed to separate expansion from contraction.

Scotland was ranked fifth among the 12 UK nations and regions, behind London, north-west England, Yorkshire and Humber, and the West Midlands. It was third-placed in June.

The south-west, south-east, east, and north-east of England, as well as Wales, saw business activity decline in July.

Scottish service providers reported further modest, although slightly softer, growth in business activity in July.

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Manufacturers signalled a renewed and sharp contraction in output, amid reports of demand shortfalls.

The July PMI report, published today, also signals a rise in employment across Scotland for the sixth consecutive month in July.

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Royal Bank said: “Panellists reported success in filling longstanding vacancies and replacing voluntary leavers. However, the upturn was only fractional amid a fresh reduction in services employment, while manufacturers recorded the softest expansion in five months.”

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Judith Cruickshank, who chairs Royal Bank’s Scotland board, said: "The start of the second half of the year saw a slowdown across the Scottish private sector amid a softer expansion in output, while new business remained broadly unchanged from June.

“Data split by sector highlighted that growth was skewed towards the service sector. Goods producers, meanwhile, pointed to a continual and accelerated drop in factory orders which then fed into a fresh contraction in manufacturing production.”

She added: “The overall cooling in business activity growth meant that employment levels were raised only fractionally in July. Moreover, the rate of job creation was the weakest seen in the current six-month spell of employment growth. With the level of outstanding business falling for the third month straight, there’s less incentive for firms to raise workforce numbers in the coming months.”