This marked a second consecutive monthly rise in business activity. While the uptick was modest overall, it was the strongest since November 2024.

However, as was the case in May, activity growth remained solely driven by the service sector. Service providers noted that new project funding and a rise in demand underscored the uptick in activity. Meanwhile, manufacturing production continued to fall sharply.

The sustained rise in overall activity was accompanied by improved confidence regarding the year ahead outlook for output. Notably, the degree of optimism was the strongest in eight months.

Commenting on the Tracker’s findings, Judith Cruickshank, chair, 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 accelerate to a nine-month high, 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 a further expansion. Though the overall rate of decrease was stronger than that seen in May, it was modest overall.

That said, new business rose for the first time in seven months at the UK level.

Private sector companies operating in Scotland remained optimistic about the year-ahead outlook for activity in June. The degree of positive sentiment edged up for a third straight month to the highest since October 2024, 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.

After a slight rise in employment in Scotland in May, workforce numbers were broadly unchanged in June. Sector data signalled that services firms increased their 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 noted across the 12 monitored UK regions and nations, with Northern Ireland being the sole exception to this trend. Among the remaining areas, Scotland experienced the least pronounced drop in employment and one that was only fractional.

As has been the case since mid-2024, Scottish firms recorded a drop in backlogs of work in June. The rate of depletion was the weakest in eight months, however. The decline was primarily driven by the manufacturing sector, where a lack of incoming new work enabled companies to process and complete outstanding tasks.

Nearly all of the 12 monitored UK regions and nations recorded a drop in backlogs in June. The North East was the only area where levels of outstanding work rose.

Scottish firms signalled a further marked increase in average input costs during June. The rate of inflation quickened from May and was historically elevated. Panellists often reported higher costs for materials, labour and energy, as well as rising supplier prices.

However, the rate at which costs rose across Scotland was less pronounced than that observed at the UK level.

Firms across Scotland raised their output prices at a reduced rate in June. Though solid, the latest increase in charges was the slowest in 11 months and similar to that seen on average across the UK as a whole. Where higher charges were recorded, they were primarily attributed to the pass-through of increased operating expenses to customers.