Scotland's private sector sees largest slump on record

Private sector activity in Scotland fell at an unparalleled level in April, according to a survey.

The Royal Bank of Scotland (RBS) PMI shows inflows of new business declined the most on record, as the Covid-19 pandemic continued to clatter the sector’s economy.

Services once again recorded a quicker decline than manufacturing, although both industries saw the most marked reductions in activity on record.

Malcolm Buchanan, chairman of the bank’s Scotland Board, said: “The Covid-19 pandemic continued to cause severe repercussions for the Scottish economy in April, with latest data pointing to an unprecedented reduction in private sector activity.

“Services bore the brunt of the downturn for a second month, although both service providers and manufacturers recorded record contractions in business activity.

“Incoming new business declined at the most marked rate in over 22 years of data collection, with firms mentioning that demand both domestically and from abroad had collapsed.

“Unsurprisingly, the 12-month outlook for activity remained negative for the second month in a row, amid substantial uncertainty surrounding the economic fallout of the pandemic, although firm’s expectations did pick up slightly from March’s recent low.

“The Covid-19 induced downturn formed part of a wider UK trend in April, but Scotland fared worse than the UK as a whole, with the decline quicker than at the national level.”

He added: “Although there is some discussion of an exit plan from the current quarantine restrictions, it is unlikely that the economy will recover quickly from such a severe downturn.”

The seasonally-adjusted headline RBS Business Activity Index – a measure of combined manufacturing and service sector output – fell from 29.7 in March to a fresh series low of 10.7 in April.

It signalled the most substantial contraction in private sector activity in the 22-year survey history.

The combined drop in the index from February was 39.4 points.

For the first time since January 1999, private sector firms in Scotland highlighted a reduction in input prices during April.

Panellists linked the decline to lower fuel, oil and staff costs.