Business optimism highest since before pandemic began

Scottish businesses are more optimistic about the future that at any time since the coronavirus pandemic began, according to the Royal Bank of Scotland.

The bank’s December Purchasing Managers’ Index (PMI) found positive sentiment among firms was at the highest since February.

Businesses linked confidence to hopes of an end to the pandemic and a swift economic recovery amid vaccine rollouts, the report found.

But the Scottish private sector remains in a downturn, it said.

The report’s Business Activity Index showed a continued moderate contraction in private sector output as lockdown measures “stifle client demand”.

Staffing levels at Scottish private sector firms reduced for the 11th month in a row in December, with this attributed to job cuts due to the pandemic, redundancies and use of the Government furlough scheme.

The rate of job shedding was similar to November, with Scotland registering the fastest decline in employment across 12 UK areas.

Malcolm Buchanan, chairman of the Scotland Board at the Royal Bank of Scotland, said the economy faced challenges in December due to coronavirus measures.

He added: “Ongoing weakness in services outweighed accelerated manufacturing growth and led to a moderate drop in activity across the private sector as a whole at year end.

“The reduction in new orders eased, however, with some firms reporting an upturn in orders due to higher confidence.

“Companies themselves registered the strongest level of optimism with regards to activity over the next year since February, as positive vaccine news buoyed expectations.

“But, with new restrictions in place to curb rising case numbers, the economy is likely to face further pressure before we experience marked improvement.”