Business confidence has risen to its highest level in eight months, according to a Royal Bank of Scotland (RBS) survey.
The private sector also saw its strongest rise in activity since November, the bank’s growth tracker found.
Overall, the combined output of Scotland’s manufacturing and service sectors rose from a score of 50.5 in May to 50.9 in June.
It marks the second consecutive monthly rise in business activity.
RBS said that while the uptick was modest overall, it was the strongest since November 2024.
The growth was driven entirely by the services sector with new project funding and a rise in demand underscoring the uptick.
Manufacturing continued to fall sharply, the tracker found.
Overall, business confidence improved to its highest level of optimism in eight months.
Judith Cruickshank, chair of the One Bank Scotland Board, said: “Scotland’s private sector recorded a sustained uptick in activity at the end of the second quarter, with growth predominantly driven by service providers.
“In contrast, the manufacturing sector faced a challenging demand environment, leading to overall declines in new business and production.
“Despite these sectoral differences, firms exhibited increased optimism about the future, with manufacturers reporting positive growth forecasts for the first time in three months.
“In June, private sector firms encountered sharply rising operating costs, but selling price inflation slowed notably. This suggests a willingness among businesses to absorb some costs to bolster sales.
“The employment landscape remained broadly stable compared to the previous month, with sector data continuing to highlight diverging trends between manufacturers and service providers.”
The UK as a whole saw output growth rise to a nine-month high, the tracker found, driven by expansions in business activity across eight of the 12 nations and regions monitored by the survey.
Companies in Scotland recorded a ninth successive monthly fall in incoming new orders during June.
The reduction in new work was centred on the manufacturing sector as services firms reported another expansion.
UK-wide, new business rose for the first time in seven months.
In Scotland, private sector companies remained optimistic about the year-ahead for activity in June.
The degree of positive sentiment rose for a third straight month to the highest since October but was weaker than that recorded for the UK as a whole.
Confidence across Scotland was supported by plans to introduce new product lines, improved operational performance, and strategic marketing efforts, the survey found.
And after a slight rise in employment in May, Scotland’s workforce numbers were broadly unchanged in June.
Services firms reported increases in staffing levels amid upturns in new business and activity.
However, this was offset by another month of job shedding at manufacturers.
A near universal fall in headcounts was also recorded across the 12 monitored UK regions and nations, with Northern Ireland being the sole exception.
Among the remaining areas, Scotland experienced the least pronounced drop in employment and one that was only “fractional”, RBS said.
Since mid-2024, Scottish firms have continued to record a drop in backlogs of work, although June’s rate of depletion was the weakest in eight months.
RBS said that the fall is driven by a lack of orders in manufacturing which has allowed firms to complete outstanding orders.
According to the survey, Scottish firms signalled another marked increase in average input costs during June.
It found the rate of inflation quickened from May and was “historically elevated”.
Survey respondents often reported higher costs for materials, labour and energy, as well as rising supplier prices.
However, the rise was less pronounced in Scotland compared to the UK as a whole.
Firms north of the order also raised their output prices at a reduced rate in June.
RBS described said the latest increase in charges was “solid” but still amounted to the slowest rate in 11 months and was similar to the UK-wide average.
Where higher charges were recorded, they were primarily attributed to the pass-through of increased operating expenses to customers.
