PRODUCTION among Scottish manufacturers recorded its fastest increase in the private sector for more than three years, according to the latest figures from Bank of Scotland.

The bank’s Regional Purchasing Managers’ Index (PMI) showed production rose at its quickest level since January 2014. New business continued to increase, the report said. However there were jobs cuts for a second month.

The index shows the month-on-month change in combined manufacturing and services output. The seasonally adjusted figure rose to 51.7 in February, up from 51.2 in January and the strongest for 19 months.

The PMI also showed that inflationary pressures, rising wages, unfavourable exchange rates and higher raw material prices contributed to an increase in cost prices.

Fraser Sime, regional director, Bank of Scotland Commercial Banking, said: “Scotland’s private- sector businesses built on the solid start shown in the opening month of the year to record the fastest rate of output growth for 19 months. The upturn was driven by a strong performance in the manufacturing sector, where production increased at the fastest pace since January 2014. That said, the overall rise in activity was still only modest.

“Despite the region growing at a stronger pace, the growth is weak in the context of historical data. Businesses continue to record ongoing spare capacity, reflected in a further reduction in staffing levels, while inflationary pressures remain substantial.

“With new business also growing at a weaker rate, firms will be wary that the upturn may soften if clients’ appetite for Scottish goods and services decreases further.”

Keith Brown, the Scottish Government’s Cabinet Secretary for the Economy, Jobs and Fair Work, said: “The latest Bank of Scotland PMI figures signal that Scotland’s private sector continued to strengthen in February, with business output increasing at its quickest rate since July 2015, alongside a further rise in new business.

“While this expansion is to be welcomed, the report also indicates challenges facing Scotland’s labour market and continued uncertainty as the UK Government prepares to trigger Article 50.

“We are taking action to support the economy, for instance through our £100 million capital stimulus package that will help to protect jobs, and our planned £500m Scottish Growth Fund, which is designed to support business growth.

“The threat to Scotland’s economy from a hard Brexit, outside the European single market of around half a billion people, is a very real one indeed.

“That is why the Scottish Government is clear that protecting our existing place in Europe’s single market is so vital for our future.

“It is the best outcome for our businesses and for economic growth.”