The latest Royal Bank of Scotland Growth Tracker shows a continuing slide in Scottish private sector activity for July. The Business Activity Index dipped to 47.3, marking four consecutive months of contraction for the region. Firms pointed to a lack of new orders, geopolitical uncertainty, and challenging economic conditions as primary drivers for the decline.
Despite the reduction in output, the Scottish labor market shows resilience. Payrolls rose for the second straight month, with the pace of job creation hitting its highest level since September 2024. Service providers led this hiring trend, driven largely by their projections for incoming projects and new business pipelines.
Inflationary pressures also show signs of cooling. While costs for materials and labor remain elevated, the rate of increase reached its lowest point since February. This softening in cost pressures corresponds with a slower rise in the prices firms charge for their goods and services.
Looking ahead, business confidence in Scotland is recovering from the lows recorded in April. While the region remains behind the rest of the United Kingdom in overall output and sentiment, the combination of a growing workforce and easing inflation provides a base for potential recovery in the second half of 2026.