With a notable increase from 49.4 in December to 51.7, the index highlighted the first expansion in private sector output in six months. However, this growth was primarily driven by the service sector, as manufacturers faced a sharp reduction in production volumes.

The service sector benefited from improved demand conditions, and reported a second consecutive monthly rise in new orders. However, manufacturing firms struggled to drive sales in the latest survey period. The opposing pull of the sectors meant only a fractional fall in overall new orders.

Reflective of activity and new order growth, only the service sector raised its staffing levels in January, and that too at an accelerated pace. Employment levels fell at manufacturers for the first time in four months.

A seventh consecutive monthly fall in new orders was recorded across Scotland in January. The decrease resulted from a sustained and sharp fall in new factory orders. However, the downturn moderated, with the rate of decrease the weakest since last July and fractional overall. The uptick in the respective seasonally adjusted index was driven by a stronger rise in inflows of new business at service providers. Firms attributed this to improvement in demand conditions, new client wins and increased advertising.

Meanwhile, new business rose for the second successive month and to a greater extent at the UK level.

Scottish private sector firms remained confident regarding the year-ahead outlook in January. Hopes for improvement in business conditions and increased marketing plans were said to have underpinned expectations. That said, the degree of confidence dimmed slightly from December’s seven-month high, and was the weakest of the 12 monitored UK regions and nations.

Despite continued weakness in new orders, the Scottish labour market remained resilient, with employment now rising for a year. However, job creation was limited to the service sector. Here, surveyed businesses noted that planned growth and anticipated orders led to stronger recruitment drives. Meanwhile, goods producers registered a fresh decline in staffing levels for the first time in four months.

Of all the monitored areas, only London surpassed Scotland by signalling the strongest uptick in employment during January.

January data revealed a ninth consecutive monthly decline in outstanding business across Scotland’s private sector. The rate of depletion softened notably from December’s recent record and was modest. Reduced business activity and sustained growth in employment allowed firms to work through any outstanding tasks.

Backlogs of work also fell at the UK-level. The rate of decrease however, was stronger than seen for Scotland.

Continuing the trend which began in June 2020, cost burdens rose across the Scottish private sector in January. The rate of inflation quickened from the recent low in December to a five-month high and was substantial overall. Rising fuel, energy and salary costs, as well as increased prices from the suppliers, were said to have pushed up input costs.

The rise in cost burdens across Scotland was also the third-strongest of the 12 monitored regions and nations, with only London and the East of England registering stronger increases.

Prices charged by Scottish private sector companies rose at a historically sharp and slightly accelerated pace at the start of 2024. The latest rise in charges was widely attributed to the pass-through effects of growing cost burdens.

In fact, of the 12 monitored regions and nations, Scotland recorded the sharpest rise in charges levied for the provision of goods and services.

Judith Cruickshank, chair, Scotland board, Royal Bank of Scotland, said: “The Scottish private sector recorded an uplift in activity at the start of the year.

“The upturn was the first seen in six months and solid overall. However, growth was imbalanced, centred solely at service providers who have shown resilience amid a subdued economic climate. Meanwhile, the manufacturing sector reported a further sharp deterioration.

“Going forward, Scotland’s private sector maintains a healthy outlook for output in the coming 12 months. However, elevated inflation and interest rates as well as lingering economic uncertainty could undermine growth prospects.”