Private sector business activity in Scotland rose for the third month in a row during March, with the upturn surpassing that for the UK as a whole.

Only London and Northern Ireland recorded stronger gains on the Business Activity Index produced by the Royal Bank of Scotland, but underlying data noted a continued divergence between the services and manufacturing sectors. While services rose at the sharpest pace recorded since June 2022, the downturn in manufacturing production

Judith Cruickshank, chair of the Scotland Board of the Royal Bank of Scotland, welcomed the increase in the combined reading of 53.6 in Scotland, up from 52.1 the previous month. Any figure above 50.0 indicates expanding activity.

"However, the growth recorded was solely garnered on the back of the fast-expanding service sector," she added. "Meanwhile, the production segment of the economy remained a challenge.

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"The lopsided nature of the expansion injects some concern over future growth. Divergent trends were also seen in terms of employment, which increased in services but decreased solidly across manufacturing."

Increases in new business were again driven by service firms, while the downturn in manufacturing new orders entered its twelfth successive month. There was also further improvement in confidence levels which reached a 13-month high.

That said, sentiment across Scotland was the second-weakest of all the 12 monitored UK regions and nations, with only the North East anticipating softer growth in activity.

The seasonally-adjusted employment index was above the 50.0 neutral mark for the fourteenth month running, but the rate of job creation was among the weakest in the sequence amid a softer rise in services employment and a fresh and solid decline in manufacturing.

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Despite the slowdown in hiring activity across Scotland, the rate of growth managed to outpace that seen at the UK level.

Cost burdens rose across Scotland during March and the rate of inflation, despite easing to a three-month low, remained steep overall. Higher prices from suppliers, in part linked to the Red Sea crisis, and rising energy, material and labour costs were to blame.

As a result, Scottish private sector firms raised their selling prices in March. However, the rate of output price inflation moderated notably to the weakest in just over three years and was modest overall. 

Moreover, Scotland recorded the softest rise in charges of the 12 monitored UK regions and nations.