Employment rises across Scotland’s private sector - Royal Bank of Scotland Growth Tracker
“Sustained job creation, despite challenging demand conditions, suggests that firms’ improved confidence is feeding through to hiring activity” – Judith Cruickshank, Scotland board chair
Scottish companies are continuing to take on more staff as business conditions move closer to stabilisation, a key survey suggests.
Royal Bank of Scotland’s latest Growth Tracker shows that private sector firms in Scotland recorded a third successive monthly rise in employment during August. The pace of job creation was broadly unchanged from July and was among the strongest recorded over the past two years, the bank noted.
Respondents to the survey often linked the latest rise to company expansion plans, new projects and efforts to replace departing staff.
The headline RBS business activity index - a seasonally adjusted index that measures the month-on-month change in the combined output of Scotland’s manufacturing and service sectors - rose to 48.9 in August from 47.3 in July. The latest reading signalled only a modest fall in private sector activity. Where activity fell, firms often attributed this to subdued market conditions and fewer new orders. A reading has to be above 50 to denote growth.
Judith Cruickshank, Scotland board chair at Royal Bank of Scotland, said: “The latest data for Scotland present a mixed picture for August, albeit one that is more positive compared to recent months. The economy is showing tentative signs of improvement, with business optimism climbing to a six-month high and the pace of decline easing in both output and new orders.
“Employment remains a clear source of strength. Sustained job creation, despite challenging demand conditions, suggests that firms’ improved confidence is feeding through to hiring activity, with payrolls being lifted in anticipation of new projects and expansion plans,” she added.
“The inflationary picture remains challenging, but the direction of travel is encouraging. Cost pressures are easing and, if that continues, we could see price increases begin to moderate in the months ahead.”
Among the 12 monitored UK regions and nations, Scotland was one of four areas to record a contraction in output - a headline activity reading of below 50 - with its decline the steepest overall. In contrast, business activity rose across the UK as a whole.
New orders across Scotland’s private sector fell again in August, extending the current run of contraction to nearly two years. RBS said anecdotal evidence linked the latest fall to a general market slowdown, ongoing geopolitical uncertainty around the Middle East, higher utility costs and subdued demand conditions.
Across the UK as a whole, new orders rose at a slower and only marginal rate.
At the same time, Scottish firms became increasingly confident about activity prospects over the next 12 months during August. The level of optimism recovered further from April’s recent low to a six-month high, but remained weaker than the UK average. Firms hoped that continued investment in new equipment and new contract wins would help to drive growth.
Alongside Scotland, staffing levels also rose in the south west of England, indicating that only two of the dozen monitored UK regions and nations reported higher payroll numbers in August, as reductions were recorded elsewhere.
Meanwhile, Scottish firms continued to report limited pressure on capacity, as backlogs of work fell for the 13th consecutive month in August. Panellists attributed the latest decline to weak inflows of new business. The rate of backlog depletion across Scotland slowed since July, but was slightly faster than that recorded across the UK as a whole.
The latest August data indicated a further substantial rise in input costs faced by Scottish businesses. However, the pace of inflation did ease for the fourth straight month to the weakest since February. Scottish companies highlighted greater outlays on raw materials, including steel, fuel and transport, which were partly linked to the conflict in the Middle East.
Meanwhile, Scottish businesses raised their prices at a sharper rate in August. The increase in selling prices was linked to the pass-through of higher input costs to clients. At the UK level, the pace of inflation also gathered pace and remained stronger than that seen in Scotland.
The latest Growth Tracker was released as new research revealed that Scotland’s design economy grew by almost a third between 2019 and 2023, outpacing growth across the wider UK over the same period.
Design Economy 2026, the Design Council’s flagship study into the value of the sector, shows the scale of design’s contribution across industries, places and jobs, and argues that strengthening design capability will be critical to delivering good growth across the UK. The report is published every three years.
It reveals that design now accounts for 4.9 per cent of Scotland’s total gross value added (GVA) - a measure of economic output - underlining its contribution to the country’s economy.
Employment in design occupations has also risen, increasing by 14 per cent between 2020 and 2025. Design-related jobs now account for 5.8 per cent of total employment in Scotland, according to the study.
Mat Hunter, chief executive of the Design Council, said: “These figures should change the way we think about design. It is not a niche creative activity sitting at the edge of the economy; it is a £136.7 billion capability embedded in the way organisations effectively innovate, tackle complex problems and grow.
“What is particularly exciting is the opportunity for growth to reach every part of the UK. Stronger design capability can help cities and regions build on their existing strengths, create higher-value jobs and turn local investment and innovation into a long-term economic advantage.
“The opportunity now is to make sure that capability is available everywhere - in businesses and public services, across every region and nation - and that we invest in the skills and diversity needed to sustain it for the future.”
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