The Scotland Business Activity Index remained above 50, with a reading of 51.1, indicating expansion, but eased slightly from October’s reading of 51.3.

The headline index signalled an increase in private sector activity in each month since the start of the year, with the rate of growth exceeding that seen at the UK level. Underlying data again revealing that the uptick was dependent on the solid performance of service sector firms.

Sentiment regarding the year-ahead outlook, although still positive, eased to a near two-year low. Firms expressed optimism about future output in November, particularly service providers who expected increased demand and enhanced marketing efforts.

Judith Cruickshank, chair of Scotland Board at Royal Bank of Scotland, said: “The Scottish private sector remained on a growth path towards the end of 2024, buoyed by the robust performance of the service sector.

“Activity growth remained commendable, and the recent downturn in new orders showed signs of stabilisation. Additionally, the latest survey period recorded job gains, predominantly concentrated within service firms.

“However, the manufacturing sector, which remains firmly entrenched in contraction, continues to present challenges for Scotland. Furthermore, the latest data revealed a notable intensification of price pressures, which have risen at rates exceeding their historical averages.

“These escalating inflationary pressures could pose headwinds to growth, particularly as confidence levels retreated further in November, hinting at a potentially more subdued outlook on the horizon.”

Sebastian Burnside, Royal Bank of Scotland Chief Economist, said: “The two brightest spots of the UK economy in November were London and the North East of England, which both continued to enjoy relatively strong growth in business activity despite signs of a loss of momentum elsewhere.

“The North East’s mini revival follows a period of underperformance throughout much of 2023, while it has become the norm to see London towards the top end of the growth rankings in recent times.

“On balance, firms throughout the UK continued to forecast growth in business activity over the next 12 months, although we’re seeing a general pattern of reduced optimism, in part linked to the anticipated rise in employment costs.

“Labour market trends showed further signs of weakening, with just under half of the 12 nations and regions monitored by the survey seeing a rise in employment. In the cases where job numbers did increase, growth was generally only marginal. Business costs rose more swiftly across most areas in November, which contributed to the cautious approach to hiring.”

Performance in relation to UK

Scottish private sector firms experienced a second straight monthly fall in new business in November. However, the rate of contraction eased, as increased new business at service firms nearly offset a sharp fall in manufacturing. Service providers benefited from successful marketing campaigns and new contract wins, while manufacturers cited client cost constraints and the Autumn budget as challenges.

Scotland was one of eight UK nations and regions to experience a decline in new business, in contrast to the UK-wide average, which indicated growth.

Confidence dropped to a 23-month low, driven by decreased optimism among service providers and record pessimism at manufacturers, who were concerned by the Autumn budget, geopolitical tensions and a general market slowdown. Only firms in Northern Ireland displayed weaker optimism compared to those in Scotland.

Job creation was registered for a twenty-second consecutive month in November, once again relying heavily on the service sector, where rising business demands spurred hiring. However, the overall growth rate was minimal and the weakest since July 2023, influenced by a deepening downturn in manufacturing and a cooling uptick at service providers. At the UK level, employment was reduced for the second consecutive month.

Continued hiring and a further drop in new business trends allowed firms in Scotland to manage their workloads effectively in November. Backlogs were cleared for the sixth straight month, and at the fastest rate since August. Additionally, signs of increasing spare capacity were also apparent at the UK level, with the rate of decrease being slightly less pronounced than that observed in Scotland.

Private sector firms based in Scotland signalled a rapid increase in input prices in November. The rate of inflation quickened to a four-month high and surpassed the UK-wide average. Higher salaries was the main contributor to higher prices, with utilities and greater prices from suppliers also being cited.

In response to rising cost pressures, charges for the provision of Scottish goods and services also rose at an accelerated pace in November. The respective seasonally adjusted index ticked up to a seven-month high. For the first time in seven months, the rate of charge inflation across Scotland exceeded that seen for the UK as a whole.