The rate at which private sector output grew was the strongest in nine months, with the Scotland Business Activity Index rising from February’s 51.0 to 52.9 in March. This compared favourably against the UK as a whole (52.2), where the rate of expansion slowed.

Furthermore, firms across Scotland noted a solid and accelerated rise in new business inflows in March. In turn, back-to-back expansions were noted in private workforce numbers, again the latest rate of job creation quickening on the month and signalling the strongest intake of staff since last July.

Private sector companies across Scotland signalled a second monthly rise in volumes of new business at the end of the first quarter. The upturn was quickest since last May and robust overall. The rise in business inflows was attributed to an array of reasons including increased advertising and investment, stronger sterling against the dollar and improved client demand. Nonetheless, the uptick in new order inflows was weaker than that recorded for the UK as a whole.

While the degree of confidence weakened in March, due to a slight dip in optimism at service providers, business sentiment towards 12-month activity was highly positive and above the historical trend. Optimism stemmed from greater client enquires, new business development, higher marketing and new contracts in the pipeline. Confidence across Scotland, however, posted the third-weakest of all the monitored UK regions, ahead of the North East of England and Northern Ireland.

Firms across Scotland raised their payroll numbers for the second successive month in March. The rate of job creation was the fastest seen in eight months, with only Northern Ireland registering stronger growth across the UK. The positive performance of the sector supported a stronger intake of staff, suggested anecdotal evidence. Underlying data pointed to quicker upturns in workforce numbers across both the manufacturing and service sectors.

Scottish firms were able to reduce their outstanding business during March, thereby stretching the current run of contraction to ten months. The rate of backlog depletion remained unchanged from the preceding survey period, the joint-softest decrease in unfinished work in the aforementioned sequence. The rate of decrease in backlogs across Scotland was quicker than that seen at the UK level.

Continuing the trend observed since December 2022, private sector firms noted a further cooling in input cost inflation during March. The rate of growth was the weakest in 22 months and only marginally faster than the UK-wide average. Nonetheless, the pace of inflation was comfortably above the long run average, with respondents blaming wage, food and energy costs.

In line with the strong growth in prices, Private sector firms across Scotland raised their charges sharply. That said, the pace of charge inflation was the second-softest in 22 months, behind February’s reading. Charges levied for the provision of goods and services across Scotland rose at a similar pace to that seen across the UK as a whole.

Judith Cruickshank, chair, Scotland Board, Royal Bank of Scotland, commented: “The rate of expansion in private sector activity across Scotland quickened at the end of the first quarter. Both manufacturing and services registered growth, with goods producers noting the stronger upturn. More so, improved investment and advertising has been fruitful, with order volumes picking up at a historically strong rate. The upturns in output and new business resulted in a further expansion in workforce numbers. In fact, despite levels of unfinished work falling at a modest pace, hiring activity across the Scottish private sector was at an eight-month high.

“Looking ahead, confidence across the private sector faltered slightly from the recent high seen in February. Nonetheless, private sector firms across Scotland were strongly confident in regards to longer term future output.”