Economy warning: Scottish Covid recovery 'fades' amidst pressure on PM candidates

Scotland's "post-pandemic rebound continues to fade" for private sector firms as growth slows to a 17-month low.

The news comes amid warnings from the Bank of England that the UK is facing a lengthy recession and growing pressure on Conservative leadership candidates to set out how they would tackle the problem.

Liz Truss and Rishi Sunak's teams clashed through the media at the weekend over support for families.

A major survey of business activity has found worsening performance in July, with new business falling for the first time since March 2021 and sustained cost inflation hitting firms.

The seasonally-adjusted Royal Bank of Scotland (RBS) Activity Index dropped to 50.2 last month in its third consecutive fall. 

Companies indicated a fall in the placement of new orders. This was in contrast with the UK as a whole, which recorded a modest upturn in new orders.

Meanwhile, the rate of job creation for Scottish companies in July was the slowest for 15 months and business confidence was found to be at a lower level than for the UK as a whole, and the pace of cost of inflation was marginally higher for Scottish operations.

Malcolm Buchanan, chair of the Scotland board at RBS, said the results show that the country's "post-pandemic rebound continues to fade", stating: "While there were signs that price pressures have peaked, costs continued to rise sharply overall. Along with signs of weakening demand, an uncertain economic outlook and the cost-of-living crisis, a number of firms expressed concerns around the outlook and fears of a recession in the year ahead."

The Bank of England expects inflation to top 13 per cent by October, with a recession to follow in the final three months of the year. The Financial Times reported that Truss will lower taxes to ease the burden on families, but Sunak responded by saying it is "simply wrong to rule out further direct support" for households this winter.

Truss supporter Penny Mordaunt later said her comments had been "misinterpreted" and Truss had "rightly challenged the wisdom of taking large sums of money out of people's pockets in tax and then giving some of that back in ever more complicated ways".