Coronavirus: Scottish business rebound 'lagging behind'

Scotland's private sector recorded one of the deepest slumps in business activity in the UK last month as lockdown restrictions continued to disrupt the economy, according to a report.

The RBS Purchasing Managers Index (PMI) for May suggested an improvement in manufacturing and services output from April's record low.

However, Scotland saw the smallest rebound in output of any area in the UK.

In terms of overall activity, only Northern Ireland fared worse out of 12 monitored areas of the UK.

The report comes after a warning last week from the Scottish government's chief economist that Scotland's economy may not return to pre-pandemic levels until the start of 2023.

Official figures showed that, in the first half of May, almost a fifth of businesses were temporarily closed.

The RBS business activity index, which measures manufacturing and service sector output, posted 21.1 for Scotland in May, up from April's low of 10.7.

The figure for Northern Ireland last month was 18.9, while the highest reading was 33.4 for the East of England.

Any figure below 50 suggests contraction. The further below the 50 level, the faster the decline signalled.

The volume of new work received by private sector firms in Scotland continued to plummet in May.

Anecdotal evidence from the survey linked the fall to temporary business closures and weak client demand amid continued lockdown restrictions.

The pace of contraction was slower than in April, but still the second-fastest since data collection for the survey began in January 1998.

At the sector level, the drop in order book volumes was sharper in services.

Job cuts

Private sector firms in Scotland reduced workforce numbers again, extending the current sequence of job cuts to four months.

Panellists reported that weak client demand had led them to cut staffing levels. The rate of job shedding was the second-quickest on record, despite easing from April.

Employment also fell at the UK level, with the rate of decline stronger than that seen in Scotland.

Scottish firms signalled renewed optimism for the year ahead, with panellists linking that to looser lockdown restrictions and hopes of an economic recovery.

That said, sentiment remained among the lowest on record, with only Northern Ireland registering a weaker outlook.

Malcolm Buchanan, chairman of RBS's Scotland Board, said: "Overall, conditions in the Scottish economy remain extremely challenging, with reductions in activity, new business and backlogs all outpacing those seen at the UK level.

"Although data indicates that the downturn has bottomed out, the pandemic has dealt an unprecedented blow to the economy."