Optimism about Scottish business has risen to its highest level in more than three years, according to the Bank of Scotland.

The private sector saw higher staffing levels and a return to growth in January.

The bank's latest Purchasing Managers' Index (PMI) survey shows confidence has reached a 43-month high.

Fraser Sime, director of small and medium enterprise banking at the firm, said: "The upturn was led by manufacturers, while service providers signalled a fractional decline in output.

"Both new business inflows and employment increased in the Scottish private sector, fuelling stronger business confidence.

"The degree of optimism in the future rose to a 43-month high in January.

"With improved demand conditions, firms raised prices for an eighteenth straight month.

"That said, input cost inflation remained far greater than that of selling prices, indicating tighter profit margins."

Bank of Scotland's measure of the month-on-month change in combined manufacturing and services output registered at 50.3 in January, from 49.4 in December.

Greater staffing levels helped Scottish private sector firms to clear outstanding business.

Backlogs of work were reduced in January, although to the softest extent since September last year.

New business inflows rose "markedly" in the manufacturing sector, supported by attracting new customer and export growth.

In the service sector, panellists reported that successful tendering had contributed to higher order intakes.