Scots business sector grew in January, growth tracker says

Scotland’s business sector grew last month, according to a banking company’s growth tracker.

The Royal Bank of Scotland (RBS) said on Tuesday that its Scotland Growth Tracker found the combined output of the country’s manufacturing and service sectors grew from 46.9 points in December to 49.6 points in January, which RBS says is optimistic for the country’s business sector.

It said that out of the 12 monitored regions, Scotland rose from 11th to 6th place in January.

It said the softer contraction in private sector output was driven by a renewed uplift in services activity but partly offset a further decline in manufacturing production.

December data showed there was a drop in employment for the first time in nearly two years, and Scottish businesses continued to let staff go come the start of January.

Scottish firms reported a leap in costs and prices at the start of 2025, just as the Bank of England raised its inflation forecast to 3.7%

Service industries joined the manufacturing industry in registering lower staffing.

Scottish private sector companies once again reported a decrease in new work intakes in January, and companies said there was lower client demand because of uncertainty about economic and domestic conditions.

The upcoming rise in national insurance was also a factor, with customers clamping down on spending in preparation.

From the new tax year in April onwards, national insurance paid by employers will rise from 13.8% to 15%.

Overall input prices rose at their sharpest pace since August 2023, with both services and manufacturing recording a steeper rate of inflation than in December.

Judith Cruickshank, chairwoman of the Scotland board, RBS, said: “Scottish firms reported a leap in costs and prices at the start of 2025, just as the Bank of England raised its inflation forecast to 3.7%.

“Pricing pressure shot back up to levels last seen in the summer of 2023, according to respondents, with energy costs and rising employment costs all playing a role.

“Nevertheless, businesses said it wasn’t a worsening situation for output, with Scotland’s activity score recovering.

“But uncertainty over the state of demand in future is clearly playing a role, even though firms in Scotland appear to have stronger expectations for the labour market than many other parts of the UK.”