ACTIVITY in the private sector has fallen for the first time in 10 months,
a business monitor has claimed.
The latest in an ongoing series of reports by the Royal Bank of Scotland (RBS) found Scotland bucked the UK trend in December by contracting rather than growing.
England’s north east was the only other part of the UK to record such a result.
The bank’s chief economist Sebastian Burnside said Scottish companies are now among the most pessimistic in the UK, with the coming months predicted to be “challenging” for firms.
According to the lender, the country’s operators suffered a drop in activity during December.
New sales went into decline and backlogs of work also fell.
While employers continued to take on new staff, this occurred at a “marginal” pace and cost burdens rose sharply, triggering an increase in selling prices to offset margin pressures.
Both service providers and makers of goods felt the squeeze.
The contraction is the first since February 2018 and is attributed to the decline in competitive pressures and a weaker underlying economic environment.
In contrast, there was a “moderate” increase in output for the UK as a whole, where new business receipts also rose.
Malcolm Buchanan, who chairs the Scotland Board at RBS, said: “Scotland’s private sector finished 2018 as one of only two places across the UK which registered a reduction in business activity during December, contrasting with the modest growth reported for the rest of the country.
“Forward-looking indicators suggest a challenging time ahead, with new sales declining for the first time in 10 months and employment increasing only marginally.
“Competitive pressures, uncertainty arising from Brexit and weak underlying business conditions were all mentioned by panellists as factors hampering performance in December.”
While outstanding business declined for a third successive month, the rate of depletion eased from the 25-month record seen during November.
Utility prices increased around Christmas, with firms hit by unfavourable exchange rate variation.
Despite this, the current run of job creation has now extended into its 10th month.
However, conditions are not expected to turn around quickly.
Burnside said: “Scotland’s businesses have shifted from being the most optimistic in the UK a few months ago, to amongst the most pessimistic.
“So much so that firms reported a marginal fall in output in December.
“Exports have struggled recently and this report shows a steady slowing in the pace of growth among Scotland’s international trading partners.”
Last week, international fast fashion brand Quiz, which is based in Glasgow, issued its second profit warning in just three months.
The family firm, which trades in domestic and overseas markets including Singapore, Georgia and the United Arab Emirates, said “challenging” conditions would mean it will not be able to hit the £11.5 million target estimated in October, and now predicts to reach £8.2m instead.
This news has come despite an 8.4% rise in revenue.
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