Expansion in private-sector workforce is hopeful sign

HOPES are high that Scotland is now past the worst of private-sector job losses as an influential survey today reveals that Scots firms last month expanded their workforces for the first time since March 2008.

Scotland was the only part of the UK to see employment levels rise in October, according to the latest Scottish Purchasing Managers Index (PMI).

Improving workloads were behind the drive to take on new staff, the research from respected forecasting group Markit reveals.

Private-sector output expanded for the fourth consecutive month in October, boosting expectations that Scotland will shortly be able to declare an end to its recession.

The continued upward trend has been put down to an influx of new orders. New business increased at its fastest rate since December 2007, the survey found, although economists warn that private-sector growth is still being driven by heavy discounting.

Andrew Self, economist at Markit, said: "The Scottish economy remained on a path towards economic recovery during October, as the turmoil from the economic and financial market collapse subsides. Manufacturers and services providers recorded concurrent output gains, and labour market conditions also appear to be improving, with Scotland the only area across the UK to record job creation in October."

However, Self warned that the rate of private-sector growth in Scotland is weaker than for the rest of the UK. Markit's business activity index saw a modest rise in October to 51.7, from 51.1 in September, with 50 marking the divide between contraction and growth. Previous surveys for September and August showed an easing in the rate of growth.

Self added: "Economic conditions remain fragile, and a marked disparity has appeared between the recovery paths being followed in Scotland and that across the UK as a whole. Since returning to growth in July, output gains north of the Border have been markedly weaker than seen at the UK wide level."

Although the rise in private-sector employment is good news for the Scottish economy, economists are concerned about how job losses announced last week at Royal Bank of Scotland will affect future surveys. RBS is axing 3,700 jobs across the UK, of which at least 700 are expected to be in Scotland. RBS chief executive Stephen Hester also warned of further redundancies to come.

Liz Cameron, chief executive of the Scottish Chambers of Commerce, said: "To have one month of jobs growth after eighteen of shrinkage is heartening, but we have also to be prepared for our share of the RBS job cuts coming, and they won't be the only ones."

The PMI report precedes UK unemployment data on Wednesday. Economists forecast unemployment to have edged up to 2.5million, although the rate at which jobs are being shed has slowed. However, youth unemployment is a particular concern, with the number of under-25s out of work expected to close in on 100,000.