Scottish firms put up their prices at a record rate last month amid “unprecedented inflationary pressures”, new analysis has shown, as rising costs continue to bite.
Business activity north of the boarder rose at the fastest pace for three months in February, according to the Royal Bank of Scotland’s latest Business Activity Index, but continued to lag the UK trend.
The index, where anything above 50 shows growth, saw the measure of combined manufacturing and service sector output climbing to 55.5 last month, up from 53.7 in January.
Malcolm Buchanan, chairman of the Scotland Board at the Edinburgh-based bank, said business activity rose as demand strengthened and Covid-19 rules were scaled back.
“That said, the stronger performance was dampened slightly by unprecedented inflationary pressures in February,” he said.
“Firms continued to face surging energy, fuel, material and staff costs, which pushed the rate of cost inflation to a survey peak, and subsequently raised their own charges at a record pace.”
And Sebastian Burnside, the bank’s chief economist, warned as Covid-19 concerns fell, the war in Ukraine could dampen growth this year.
“Cost inflation remains at or close to record levels in every part of the UK, and could be made even worse by the recent surge in energy prices and heightened supply chain pressures brought about by Russia’s invasion of Ukraine,” he said.
“At the same time, we’re seeing strong core inflationary pressures as businesses in every UK region rapidly raise their output prices, in many cases at record rates.
“As Covid concerns subside, new inflation and geopolitical risks have emerged in their place, both of which represent potential headwinds to regional growth in 2022.”
In February, Scotland recorded the slowest rate of cost inflation across the UK.
But business expansion in Scotland was also behind the UK-wide trend, and of the 12 monitored UK areas only the North East saw a slower upturn in new business than those north of the border during February.
The rise in Scotland was an 11th straight monthly increase in new business.
At the sector level, manufacturing order book volumes rebounded while service firms recorded a quicker uplift in new work, the bank said.