Covid Scotland: Brexit fuels costs as economy surges on easing of coronavirus rules

SCOTLAND’S private-sector economy recorded further rapid growth in June, and employment rose across manufacturing and services, but inflationary pressures were intense amid factors including Brexit, a survey shows.

Royal Bank of Scotland’s latest PMI (purchasing managers’ index) report showed the growth rate slowed from May, when it was the strongest since the survey began in 1997. However, June growth was the second-sharpest on record, fuelled by the loosening of Covid-related restrictions. The business activity index for Scotland, a combined measure of manufacturing and services output, fell from 61.5 in May to 58.4 in June, remaining way above the 50 no-change mark.

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Although the pace of job-creation slowed from May’s peak, the rate in June was the second-quickest on record, with employment growth faster in services than in manufacturing.

Royal Bank noted input prices faced by Scottish private sector firms “continued to soar during June”, with the rate of inflation the fastest since February 2011 and at a survey record in manufacturing. The bank said: “Panellists attributed greater costs to material shortages, price hikes at suppliers, Brexit and higher fuel and utilities prices.”

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Average prices charged by companies rose in June at the fastest pace since records for this measure began in November 1999. Firms’ optimism about the prospects for increased activity on a 12-month horizon, while not as high as in May, was among the strongest in the survey’s history.

Malcolm Buchanan, who chairs Royal Bank’s Scotland board, said: “June data showed some signs of optimism for the Scottish private sector, as the easing of lockdown restrictions and improved consumer confidence continued to invigorate growth. The rates of increase in both business activity and new work slowed only slightly from May’s respective series records and remained marked.

“Inflationary pressures are a key concern, however, as material shortages and greater fuel and utilities fees continued to put severe upward pressure on input costs and, subsequently, selling prices.”

He added: “Nonetheless, the private sector remains in a good position as we enter the third quarter of the year. Growth showed little sign of slowing notably in June, and firms remained among the most confident on record of higher activity in the coming 12 months.”

The Herald Scotland

The Herald Scotland

The Herald is a Scottish broadsheet newspaper founded in 1783. The Herald is the longest running national newspaper in the world and is the eighth oldest daily paper in the world. The title was simplified from The Glasgow Herald in 1992