• Firms signal fresh increases in output and new orders
• Employment rises for fifth straight month
• Price pressures intensify
The latest Royal Bank of Scotland Growth Tracker data signalled stronger business conditions across Scotland’s private sector at the start of the final quarter of 2026. Firms recorded fresh increases in both output and new orders, while staffing levels rose further and business confidence improved.
The headline Royal Bank of Scotland 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 – posted above the neutral mark of 50.0 for the first time in seven months in October. Moreover, a reading of 52.4, up from 48.8 in September, indicated the strongest rise in activity since August 2024.
Renewed increases in activity were recorded across both manufacturers and service providers. Anecdotal evidence often linked growth to improved customer demand and firmer economic conditions.
Scottish private sector employment rose for a fifth consecutive month in October. According to anecdotal evidence, payrolls were raised to meet current production needs and expand capacity for anticipated projects. The pace of job creation was the slowest in four months.
Commenting on the Tracker’s findings, Iain Morrison, Scotland Managing Director, Commercial Mid-Market, Royal Bank of Scotland, said, “October marked a clear turnaround for Scotland, with output returning to growth. While services were the main growth engine, manufacturing also provided a modest lift.
“For the first time in over two years, demand improved, with new business expanding. Employment also continued to rise, albeit at a slowing pace compared to the previous four months. Together, these positive indicators suggest a more upbeat end to the year.
“However, inflation remains high and continues to intensify. This presents a threat that could choke off the return to growth for Scottish businesses that we are seeing in this report.”
Performance in relation to UK
Output across the UK as a whole was up for a fourth month running in October. The pace of growth was the fastest in eight months and slightly quicker than that seen for Scotland.
Scottish private sector firms reported a renewed rise in new business at the start of the fourth quarter of 2026, as the respective seasonally adjusted index posted in growth territory for the first time in 25 months. The pace of growth was the fastest seen since July 2024. The upturn was driven by the service sector, with firms attributing higher sales to new projects, client wins and improved demand conditions.
Scotland was one of 10 UK nations and regions, out of the 12 tracked, to see new business rise, although the pace of growth was slower than the UK average.
At the UK level, employment rose for the first time in over two years in October, albeit only marginally.
Scottish companies indicated a further reduction in the level of work-in-hand (but not yet completed) during October, thereby stretching the current run of decline to 15 months. That said, the rate of depletion was little-changed from September and modest.
Across the UK as a whole, backlogs fell at a slightly stronger pace than that seen in Scotland.
Adjusted for seasonal factors, the Input Prices Index posted above the neutral 50.0 level to signal a substantial and historically strong increase in cost burdens faced by Scottish private sector firms in October. The rate of inflation was the sharpest in four months, and only slightly weaker than the UK-wide trend. Panellists often commented that higher fuel costs had pushed up expenses. Higher raw material and labour costs were also cited.
Increased costs were passed on to customers where possible, as Scottish businesses raised their charges for goods and services in October. Selling prices have now risen on a monthly basis over the last six years, with the latest increase sharp and stronger than that seen in September.
Of the 12 tracked UK regions and nations, Wales, the East of England and Scotland recorded the weakest rates of charge inflation in October, albeit ones that were still marked overall.
Read the full report here….