SCOTTISH businesses are more optimistic about the future than at any time since the coronavirus pandemic began, according to the Royal Bank of Scotland (RBS).

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

Firms linked confidence to hopes of an end to the pandemic and a swift economic recovery amid vaccinations, the report found. But it added the private sector remains in a downturn.

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, chair of the Scotland Board at RBS, said the economy faced challenges in December due to Covid 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.”