Private sector downturn amid tougher coronavirus measures

Scotland’s private sector entered a downturn in October amid tougher coronavirus restrictions, according to a business report.

The latest Royal Bank of Scotland Purchasing Managers’ Index shows the stricter rules “curbed” businesses activity.

The report’s Business Activity Index – a measure of combined manufacturing and service-sector output – fell to 43.2 in October from 51.2 in September, a sharp drop but less marked than in spring.

Restrictions were placed on hospitality from October 9, with the sale of alcohol banned indoors across Scotland and pubs and restaurants in the central belt forced to close completely.

These rules were replaced with a five-tier system this month.

Malcolm Buchanan, RBS Scotland Board chairman, said the renewed restrictions “seem to have staved off recovery”.

A significant drop in new business has been key to the decline, the report found, with Scotland recording the most severe reduction across the UK, attributed to weak client demand due to the pandemic.

Business confidence among private-sector respondents hit a five-month low with Brexit fears, coronavirus concerns and the drop in demand said to be behind the fall.

Scottish private-sector employment fell for the ninth consecutive month and the rate of jobs lost was the sharpest since July.

Mr Buchanan said: “Renewed lockdown restrictions seem to have staved off the recovery in the Scottish private sector during October.

“Output declined sharply amid a marked contraction in the level of new business, although the falls were still less sharp than in the spring.

“Unsurprisingly, the service sector bore the brunt of the impact, registering a rapid drop in activity that outweighed a further uptick in manufacturing output, and a much more marked reduction in order book volumes than goods producers.”

He added: “Concerns surrounding the pandemic also weighed on confidence, with the level of positive sentiment the lowest for five months.

“All in all, the data make it clear that there is an uncertain and bumpy road ahead.”