Business activity in the private sector in Scotland dropped steeply in January due to lockdown, according to a business report.

The latest Royal Bank of Scotland purchasing managers’ index (PMI) recorded not only lower business activity, but also a reduction in jobs in the private sector.

The report’s business activity index – a measure of combined manufacturing and service-sector output – fell to 33.3 in January from 47.3 in December, marking the fifth month in a row of lowered activity.

An index score of 50 or above is regarded as growth, with anything lower seen as a fall in business.

Many of the businesses also reported they had reduced staff numbers – with higher losses reported in service industries versus manufacturing ones.

However, despite the challenging conditions, Scotland’s private-sector firms in January recorded the strongest level of confidence with regards to activity over the next 12 months since April 2014.

Despite the ongoing downturn, companies remained optimistic on the back of the vaccine rollout and amid hopes of looser restrictions and a solid economic recovery, according to anecdotal evidence.

Malcolm Buchanan, RBS Scotland board chairman, said the stricter lockdown measures “took a toll on the sector”.

Mr Buchanan said: “The falls remained slower than at the height of the first lockdown last spring, perhaps reflective of companies adapting to restrictions, but were still severe.

“Positive news again came from business confidence, which was the strongest since April 2014 amid hopes of an economic recovery once restrictions are lifted.

“Conditions will remain very challenging in the meantime, but there is a light at the end of the tunnel for Scotland’s economy as the vaccine rollout progresses and measures are loosened.”