Nearly three quarters (73%) of firms expect to see their turnover increase in the year ahead, up from 60% polled in December 2023. Nearly a quarter (23%) of these expect to see their revenue rise by between six and 10% over the next 12 months, with just over a fifth (21%) expecting it to grow by even more.
Meanwhile 70% of businesses are confident they will be more profitable in 2025. This compares to 68% who said the same last year.
While general revenue and profitability growth is firms’ top priority at 52%, 40% said they will be targeting improved productivity, and the same proportion said they will be aiming to enhance their technology – such as automation or AI – or upskill their staff (both 29%). More than a fifth (22%) want to improve their environmental sustainability.
To support their goals, 28% will be investing in new technology, with a further 19% making specific investments in AI. Meanwhile, nearly a quarter (24%) will be investing in expanding into new UK markets and a similar proportion (23%) will be investing in staff training.
The Business Barometer, which surveys 1,200 businesses monthly and which has been running since 2002, provides early signals about UK economic trends both regionally and nationwide.
Martyn Kendrick, Scotland director at Bank of Scotland Commercial Banking, said: “Scottish businesses are looking ahead to 2025 with stronger growth expectations, and setting out clear plans to drive this expansion through investments in new technology, new markets and their own teams.
“As we enter the new year, we’ll continue to by their side to help them pursue their ambitions and seize all opportunities that lie ahead.”
Most privately held Scottish firms (90%) feel confident about their growth prospects heading into next year
Easing cost pressures were cited as the main cause (46%) alongside access to finance (43%) – significantly above the UK average for both
Firms plan to diversify through new products and internationalisation
Nine in ten (90%) privately owned Scottish firms feel optimistic about their growth prospects as they head into 2025, according to KPMG UK’s Private Enterprise Barometer.
The new survey captured insights from 1,500 private business owners across the UK, including 125 from Scotland, spanning sectors such as professional services, finance, technology, industrial manufacturing and retail.
Easing cost pressures emerged as the primary driver of this positive outlook, cited by nearly half (46%) of respondents, alongside improved access to finance (43%) – both results significantly exceeding the UK average of 32% and 31% respectively.
Looking ahead, Scottish firms are charting ambitious growth strategies. Seven in ten (70%) are setting their sights on international expansion and over a third (35%) plan to diversify through new products or services within the next five years.
When it comes to financing these ambitions, nearly half (49%) plan to use their own cash stocks as their primary funding source. Additionally, private equity and capital markets were ranked as the most popular sources for external diversification funding, outpacing traditional bank debt, which is of note given only 17% reported difficulties in accessing finance.
Technology is central to the growth plans of Scottish businesses, with over half (52%) citing it as critical to their future success. Notably, seven in ten (70%) expect to invest in artificial intelligence, and three in five (60%) plan to use this investment to enhance the employee experience – a higher proportion than any other UK region.
Skilled workers will be crucial to delivering this investment though, with more than half (55%) confident of recruiting people with the right qualifications and experience to support their business. However, with the battle for talent a competitive one, the same amount (55%) cited that they are evolving their employee value proposition to help with recruitment and retention – well ahead of the national average (37%).
Vishal Chopra, Scotland Office Senior Partner at KPMG UK, said:“These findings underscore the resilience and forward-thinking nature of Scotland’s private business community, driven by a strong culture of innovation.
“With 90% of respondents feeling optimistic about their prospects going into next year, and 70% planning to expand into new markets – the second-highest percentage of any UK region – it’s clear that businesses are confident and firmly committed to their ambitious growth strategies.
“What’s especially promising is the emphasis firms are placing on enriching the employee experience, alongside strategic investments in technology to support and sustain these efforts.”
National outlook
92% of Britain’s private business owners are confident of growth in 2025.
Those businesses with lower degrees of confidence highlighted challenges such as increased competition and access to funding as limiting factors.
When it comes to areas of planned investment over the next 12 months, technology was ranked as the highest priority (63%), followed by skills and workforce (49%). Of those looking at future tech investment, almost three quarters (73%) plan to invest in AI to improve the customer experience.
Euan West, Head of KPMG Private Enterprise in the UK and EMA, said:“2024 has been a turbulent year, so it’s pleasing to see that private businesses are showing resilience and casting a very positive outlook for growth and investment in 2025 and beyond.
“Going into 2025 buoyed by this optimism will help these firms drive results in what will likely be another tough year. Investment in areas like technology and talent will be essential for firms to realise their growth ambitions and make a significant impact on the UK’s economic health.”
Business confidence in Scotland rose 13 points to 44% in December
While firms’ optimism in their own trading prospects fell four points to 39%, their optimism in the economy rose 31 points to 49%
Overall UK business confidence dipped three points in November to 41%
Business confidence in Scotland rose 13 points during December to 44%, according to the latest Business Barometer from Bank of Scotland.
While companies in Scotland reported lower confidence in their own business prospects month-on-month, down four points at 39%, their optimism in the economy rose 31 points to 49%. Taken together, this gives a headline confidence reading of 44% (vs. 31% in November).
A net balance of 44% of businesses in the country also expect to increase staff levels over the next year, up 21 points on last month.
Looking ahead to the next six months, Scottish businesses identified their top target areas for growth as introducing new technology (52%), entering new markets (42%) and investing in their team, for example through training (38%).
The Business Barometer, which surveys 1,200 businesses monthly and which has been running since 2002, provides early signals about UK economic trends both regionally and nationwide.
National picture
Overall UK business confidence fell two points in December to 39%, although remained above the long-term average of 29%.
While firms’ confidence in the wider economy strengthened five points to 31%, their confidence in their own trading prospects fell eight points to 47%.
London was the most confident UK nation or region in November (53%) for a second month in a row, followed by the North West (50%).
Sector insights
Although confidence fell in the service sector, this was partly offset by rises in manufacturing and retail, with these sectors swapping places in December.
Services fell from 46% to 35% in December – a fall of 11 points. In contrast, manufacturing and retail increased 10 points to 42% and 43% respectively, thereby taking manufacturing and retail above services for the first time in 4 months. Trading prospects for retail rose for the first time in three months, while construction confidence was steady at 41%, equalling last month’s result.
Martyn Kendrick, Scotland director at Bank of Scotland Commercial Banking, said: “It’s encouraging to see Scottish business confidence end the year on the rise, and above the UK average.
“Businesses will be focused on putting their plans for fresh growth into action. We’ll continue to be by their side to support their ambitions.”
Hann-Ju Ho, Senior Economist, Lloyds Commercial Banking, said: “In the last few months overall confidence has fallen incrementally, and in December the trend continued as it fell by 2 points to 39%. While there hasn’t been any significant one-month change, confidence has gradually drifted from the summer’s highs”.
“The key difference in this month’s results is that the fall in confidence is driven by firms’ own trading prospects which have proven to be resilient over the last quarter. There was, however, more positivity regarding the wider economy and, going into 2025, this offers some hope if companies continue to feel confident about the economy.
“Elsewhere, although confidence fell in the services sector, this was partly offset by improvements in manufacturing and retail – which could be a significant for this time of year.”
Paul Kempster, Managing Director for Relationship Management, Lloyds Bank Business & Commercial, said: “The mixed results in trading prospects and economic optimism suggest that while businesses feel they are facing some challenges, there is still some opportunity in regard to the wider economy.
“Although overall confidence dipped this month, we’re still optimistic that firms’ trading prospects will return to the levels seen earlier this year.
“The regional picture is also mixed with significant increases in confidence in Scotland and Northern Ireland, but more acute falls in confidence in the North-East. As we enter the New Year, and businesses across the country consider their plans for 2025, we are committed to helping them to navigate their journey and prosper.”
SCOTTISH BUSINESSES REPORT RISE IN ECONOMIC OPTIMISTISM
Business confidence in Scotland fell three points during September to 33%, but remains above the year-to-date average of 30%
Firms’ optimism in the economy rose 10 points to 29% as Scottish businesses identified their top target areas for growth in the next six months as evolving their offer (40%), entering new markets (39%) and investing in their team (30%)
Overall UK business confidence dipped five points in September from 41% to 36%, with firms’ outlook on future trading prospects down marginally on last month’s reading of 46% to 41%
Business confidence in Scotland fell three points during September to 33%, but remains above the year-to-date average of 30%, according to the latest Business Barometer from Bank of Scotland Commercial Banking.
Companies in Scotland reported lower confidence in their own business prospects month-on-month, down 14 points at 39%. When taken alongside their optimism in the economy, up 10 points to 29%, this gives a headline confidence reading of 33%.
Scottish businesses identified their top target areas for growth in the next six months as evolving their offer (40%), entering new markets (39%) and investing in their team (30%).
The Business Barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
A net balance of 31% of businesses in the region expect to increase staff levels over the next year, up seven points on last month.
National picture
Overall UK business confidence fell five points in September from 41% to 36%. Firms’ outlook on their own trading prospects remained strong at 41% despite a five-point drop on last month, and their optimism in the UK economy also remained robust at 30%, down by seven points on August’s reading.
Businesses hiring intentions remained upbeat with 26% of firms reporting plans to increase their staff levels over the next year, down five points on last month.
Companies in London reported the highest levels of business confidence for the second consecutive month at 44% (down eight points month-on-month). Firms in Yorkshire reported the second highest reading at 40% (up eight points month-on-month), followed by those in the North West at 38% (up four points month on month).
The fall in business confidence this month centred around the retail and services sectors, following strong sentiment in August. Retail confidence fell to 32% (down 12 points) dragged down in particular by trading prospects, while services confidence declined to 36% (down eight points). Construction confidence also fell to 36% (down eight points). However, manufacturing was stronger, with confidence rising to a three month high of 36% (up six points).
Chris Lawrie, regional director for Scotland at Bank of Scotland Commercial Banking, said: “Despite a small dip this month business confidence in Scotland remains positive, with many firms seeking opportunities to grow by expanding their teams and investing in new markets.
“As we move into the winter months, those operating in the hospitality, retail and leisure sectors should be planning carefully for any increase in Christmas trade and getting ready to capitalise on opportunities as they arise. We’ll remain firmly by the side of businesses to support their ambitions and offer the tailored funding needed to thrive.”
Paul Gordon, managing director for SME and Mid Corporates at Lloyds Bank Commercial Banking, said: “As part of the Barometer survey data, we asked firms what represents the biggest issue for the UK Economy. The overwhelming answer from businesses this month was a combination of inflation, interest rates and energy prices.
“With recent data from various organisations in August showing inflationary measures having their desired effect, including our own UK Sector Tracker which showed demand falling across most sectors, the coming months may see a more stable environment where prices are concerned.
“Energy prices, from the wholesale market, have decreased and while businesses are not eligible for the same consumer price cap, most businesses will have longer term agreements with energy suppliers that shelter them somewhat from short term volatility. However, as we move into winter, it would be prudent for businesses to review their utility contracts and see if there are savings to be made.”
Hann-Ju Ho, Senior Economist Lloyds Bank Commercial Banking, said: “While the gains in business confidence we saw in August have not been maintained, it’s important to see the wider trend clearly reflected in the data which paints a very different picture to this time 12 months ago, when the economy was in significant difficulties.
“Despite some month-to-month movements, if you look at the year in quarterly time periods, confidence has steadily risen from 20% in the first quarter, 26% in the second and now an average of 27% in the third.
“Although the economic environment remains uncertain with inflation and interest rate pressures playing their part, the recent decision by the Bank of England to leave interest rates unchanged is likely to help businesses feel more upbeat about the future, which may underpin confidence in the last three months of the year.”
Quickest rise in private sector activity since June 2022
Growth in new orders also picks up
Employment growth at eight-month high
According to the latest Royal Bank of Scotland PMI® data, the Scottish private sector saw a second successive monthly rise in business activity, with underlying data showing quicker growth across both the manufacturing and service sectors.
The rate at which private sector output grew was the strongest in nine months, with the Scotland Business Activity Index rising from February’s 51.0 to 52.9 in March. This compared favourably against the UK as a whole (52.2), where the rate of expansion slowed.
Furthermore, firms across Scotland noted a solid and accelerated rise in new business inflows in March. In turn, back-to-back expansions were noted in private workforce numbers, again the latest rate of job creation quickening on the month and signalling the strongest intake of staff since last July.
Private sector companies across Scotland signalled a second monthly rise in volumes of new business at the end of the first quarter. The upturn was quickest since last May and robust overall. The rise in business inflows was attributed to an array of reasons including increased advertising and investment, stronger sterling against the dollar and improved client demand. Nonetheless, the uptick in new order inflows was weaker than that recorded for the UK as a whole.
While the degree of confidence weakened in March, due to a slight dip in optimism at service providers, business sentiment towards 12-month activity was highly positive and above the historical trend. Optimism stemmed from greater client enquires, new business development, higher marketing and new contracts in the pipeline. Confidence across Scotland, however, posted the third-weakest of all the monitored UK regions, ahead of the North East of England and Northern Ireland.
Firms across Scotland raised their payroll numbers for the second successive month in March. The rate of job creation was the fastest seen in eight months, with only Northern Ireland registering stronger growth across the UK.
The positive performance of the sector supported a stronger intake of staff, suggested anecdotal evidence. Underlying data pointed to quicker upturns in workforce numbers across both the manufacturing and service sectors.
Scottish firms were able to reduce their outstanding business during March, thereby stretching the current run of contraction to ten months. The rate of backlog depletion remained unchanged from the preceding survey period, the joint-softest decrease in unfinished work in the aforementioned sequence. The rate of decrease in backlogs across Scotland was quicker than that seen at the UK level.
Continuing the trend observed since December 2022, private sector firms noted a further cooling in input cost inflation during March. The rate of growth was the weakest in 22 months and only marginally faster than the UK-wide average. Nonetheless, the pace of inflation was comfortably above the long run average, with respondents blaming wage, food and energy costs.
In line with the strong growth in prices, Private sector firms across Scotland raised their charges sharply. That said, the pace of charge inflation was the second-softest in 22 months, behind February’s reading. Charges levied for the provision of goods and services across Scotland rose at a similar pace to that seen across the UK as a whole.
Source: Royal Bank of Scotland, S&P Global.
Judith Cruickshank, Chair, Scotland Board, Royal Bank of Scotland, commented: “The rate of expansion in private sector activity across Scotland quickened at the end of the first quarter.
“Both manufacturing and services registered growth, with goods producers noting the stronger upturn. More so, improved investment and advertising has been fruitful, with order volumes picking up at a historically strong rate.
“The upturns in output and new business resulted in a further expansion in workforce numbers. In fact, despite levels of unfinished work falling at a modest pace, hiring activity across the Scottish private sector was at an eight-month high.
“Looking ahead, confidence across the private sector faltered slightly from the recent high seen in February. Nonetheless, private sector firms across Scotland were strongly confident in regards to longer term future output.”
Business confidence in Scotland rose four points during February to 14%
Scottish businesses identified their top target areas for growth in the next six months as hiring new employees (43%), introducing new technology (31%) and evolving their offer (30%)
Overall, UK business confidence remained positive in February at 21% and 31% of firms reported feeling positive about their own trading prospects for the year ahead
Business confidence in Scotland rose four points during February to 14%, according to the latest Business Barometer from Bank of Scotland Commercial Banking.
Companies in Scotland reported lower confidence in their own business prospects month-on-month, down one point at 7%. When taken alongside their optimism in the economy, up eight points to 20%, this gives a headline confidence reading of 14%.
Scottish businesses identified their top target areas for growth in the next six months as investing in their team (43%), introducing new technology (31%) and evolving their offer (30%).
The Business Barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
A net balance of 1% of businesses in the region expect to reduce staff levels over the next year, down 15 points from January when a net balance of 14% of businesses planned to create new jobs.
Overall UK business confidence decreased by just one point to 21% in February. Firms remained positive about their own trading prospects with a net balance of 31% expecting business activity to increase in the coming 12 months.
Firms also reported plans to create new jobs with 20% of businesses intending to make new hires over the next 12 months – up three points from January.
All UK regions and nations reported a positive confidence reading in February, with six areas reporting a month-on-month increase in confidence. Of those, the West Midlands (up 30 points to 48%) and Yorkshire and Humber (up 22 points to 34%) saw the largest monthly increases.
Chris Lawrie, area director for Scotland at Lloyds Bank Commercial Banking, said:“After a dip in confidence in January, it is good to see that businesses are once again feeling optimistic about their own trading prospects and the wider economy.
“However, rising costs, supply chain challenges and skills shortages are still affecting several key sectors across the country. As firms grapple with these challenges it’s easy for attention to pull away from seizing opportunities for growth.
“Firms that keep a close eye on cash flow and manage their working capital will be best placed to take on any unforeseen challenges and go after prospects in the months ahead.”
Retail confidence bounced back, rising for the first time in three months to 21% (up 14 points), led by improvements in both trading prospects and economic optimism. However, business confidence fell in construction (down eight points to 19%) and services (down five points to 20%) although this remains higher than in the latter part of 2022.
Scotland only: Paul Gordon, Managing Director for SME and Mid Corporates, Lloyds Bank Commercial Banking, said: “While overall confidence has dipped slightly, it’s encouraging to see businesses backing their own trading prospects. This may well be down to the easing of cost pressures as we see the prices of commodities such as oil and energy coming down. At the same time, with pay expectations easing, this may be giving businesses the boost they need to weather the rest of the year.”
“As we move further into 2023, focusing on growth and investment should be key for businesses across the sectors, while ensuring that margins and cash flow are also prioritised.”
Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “Business confidence has lost a little momentum this month, following the strong gains seen recently. Firms are feeling more cautious about the wider economy. However, confidence in their own trading prospects continues to strengthen, helped by tentative signs that wage and other cost pressures may be reducing.
“While inflation appears to be tapering, pressures on consumers will need to ease further to help make it a more stable environment for businesses to operate.”
Bank of Scotland Business Barometer for January 2023 shows:
Business confidence in Scotland fell five points during January to 10%
As National Apprenticeship Week approaches 27% of businesses in Scotland say investing in training and development presents the biggest opportunity for growth in the next six months
Overall UK business confidence reaches six-month high at 22% with twice as many businesses optimistic about the economy than in December
Business confidence in Scotland fell five points during January to 10%, according to the latest Business Barometer from Bank of Scotland Commercial Banking.
Companies in Scotland reported lower confidence in their own business prospects month-on-month, down 17 points at 8%. When taken alongside their optimism in the economy, up six points to 12%, this gives a headline confidence reading of 10%.
Scottish businesses identified their top target areas for growth in the next six months as evolving their product and service offer (42%), investing in sustainability (29%) and investing in their teams (27%).
The Business Barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
A net balance of 14% of businesses in the region expect to increase staff levels over the next year. This is up from December when a net balance of 11% of businesses reported plans to make new hires.
Overall UK business confidence climbed in January, with firms reporting their highest confidence levels since July last year.
Business confidence increased by five points to 22% and the net balance of businesses feeling optimistic about the economy doubled on December’s reading to 16%.
Ahead of National Apprenticeship Week (6-12th February) 30% of businesses across the UK reported that they are looking at opportunities to grow by investing in staff development and training. A net balance of 17% of firms reported plans to create new jobs in the next twelve months.
Chris Lawrie, area director for Scotland for Bank of Scotland Commercial Banking, said: “Ongoing pressures from wider economic challenges are clearly continuing to impact Scottish businesses, but confidence remains in positive territory and firms’ resilience shines on.
“Over the next few months as concerns such as rising costs continue, it is important firms keep a close eye on cash flow. Having reserves ready for when challenges hit makes managing turbulent periods easier. We’ll remain by the side of Scottish firms to help them successfully navigate the months and years ahead.”
For the second month in a row, confidence in the manufacturing and service sectors increased, with manufacturing rising to 28% (up 15 points) and services up to 25% (up seven points).
Business confidence in construction was down two points to 27%, while retail confidence fell for the second month in a row to 7% (from 13%), the lowest level since February 2021.
Paul Gordon, Managing Director for Relationship Management, Lloyds Bank Business & Commercial Banking, said: “After a challenging 2022, it’s heartening to see confidence rising for the second consecutive month.
“This is the first back to back increase since September 2021. There is no doubt that the business environment remains challenging and uncertainty still remains, but this improvement in optimism is very welcome as we start 2023.
“With pay expectations tempering, trade expectations set to improve, and a clearer way forward on energy price support, this may give businesses a bit more certainty and the confidence they need to inspire investment and promote growth.”
Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said:“Business confidence continues to improve following the December boost. Firms are clearly more optimistic about the wider economy and this is driving the increase, helped by precursory signs that wage and other cost pressures may be easing.
“It is still a tough environment for businesses, with high energy bills remaining a concern during the winter months, but there are grounds for optimism for 2023 if inflation starts to trend lower.”
Bank of Scotland’s Business Barometer for October 2022 shows:
Business confidence in Scotland fell 10 points during the last month to 5%
Country’s businesses identify top growth opportunities as evolving their offering (33%), investing in their teams (29%) and entering new markets (27%)
Overall UK business confidence fell one point during the last month to 15%, with five out of 11 nations and regions reporting a higher reading than September
Business confidence in Scotland fell 10 points during October to 5%, according to the latest Business Barometer from Bank of Scotland Commercial Banking – conducted between 3rd-17th October.
Companies in Scotland reported lower confidence in their own business prospects month-on-month, down 11 points at 22%. When taken alongside their optimism in the economy, down 10 points to -14%, this gives a headline confidence reading of 5%.
Scottish businesses identified their top target areas for growth in the next six months as evolving their offering (33%), investing in their teams (29%) and entering new markets (27%).
The Business Barometer, which questions 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
A net balance of 16% of Scottish businesses expect to reduce staff levels over the next year, down two points on last month.
Overall UK business confidence fell one point during October to 15%, in line with the average over the last three months. Firms’ outlook on their future trading prospects was up two points to 27%, and a net balance of 21% are planning to create new jobs, up four points on last month. However, businesses optimism in the wider economy dropped three points to 2%.
Five UK regions and nations recorded a month-on-month increase in optimism in October. Of those, London (up 16 points to 49%), the North West (up 14 points to 28%) and Wales (up nine points to 5%) saw the largest monthly increases, with London remaining the most optimistic region overall.
Chris Lawrie, area director for Scotland at Bank of Scotland, said: “Ongoing economic challenges, not least the cost of doing business, is hitting firms and we’re seeing this reflected in a less optimistic outlook.
“As we approach the busiest trading period of the year for many, businesses across the country need to prioritise maintaining a steady cashflow to remain resilient and be well-equipped for any opportunities to grow.
“After all, Christmas can be a frenetic and expensive time for businesses and their customers, so firms need to have a plan in place to manage this, as well as having some money aside to cover unexpected costs.
“We’ll remain by the side of Scottish businesses to help them continue to navigate the challenging market conditions and push for growth.”
Business confidence in the manufacturing sector fell for the fifth month in a row, to 13%, down 1 percentage point, the lowest confidence level since February 2021.
Confidence in the retail sector declined by 6 percentage points to 9%, while confidence in the services sector also fell to 16%, both the lowest levels since early 2021.
However, the construction sector saw a 10 percentage point rise to 20%, although this level still remains weaker than in the first half of the year.
Paul Gordon, Managing Director for SME and Mid Corporates, Lloyds Bank Commercial Banking, said:“While confidence has marginally decreased this month, this also comes at a time of great economic uncertainty. The fact that it has only fallen by 1% suggests that businesses are showing resilience.
“As we head into the winter months and price pressures continue, energy price increases will start to bite and we are seeing continued pressure on pay expectations.
“Businesses need to keep a watchful eye on costs to ensure they are in the best possible position to face any future headwinds. For businesses that may be struggling, we encourage them to reach out to their networks for support. At Lloyds Bank we remain by the side of businesses to help navigate these challenging times.”
Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “While business confidence has marginally fallen this month, along with a drop in forward looking economic optimism, it is encouraging to see businesses still looking to increase their headcounts.
“However, cost pressures remain evident as businesses raise prices to protect their margins and wage pressure continue to be impactful. Given the recent turbulence in financial markets, it will be interesting to see how this will affect business confidence.”
Lloyds Bank’s Business Barometer for September 2022 shows:
Business confidence in Scotland rose 10 points during September to 15%
Scottish firms identify top growth opportunities as investing in their teams (39%), evolving their offering (38%) and diversifying into new markets (34%)
Overall UK business confidence remained the same as last month at 16%, with only three out of 11 nations and regions reporting a higher reading than August
Business confidence in Scotland rose 10 points during September to 15%, ending three consecutive months of decline, according to the latest Business Barometer from the Bank of Scotland Commercial Banking – conducted between 1st-15th September, before the Chancellor’s economic announcement.
Companies in Scotland reported higher confidence in their own business prospects month-on-month, up 18 points at 33%. When taken alongside their optimism in the economy, up two points to -4%, this gives a headline confidence reading of 15%.
Scottish businesses identified their top target areas for growth in the next six months as investing in their teams (39%), evolving their offering (38%) and diversifying into new markets (34%).
The Business Barometer, which questions 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
A net balance of 18% of Scottish businesses expect to increase staff levels over the next year, up eight points on last month.
Overall UK business confidence stayed the same as in August during September at 16%. Despite the net balance of businesses planning to create new jobs increasing by one point to 17%, firms’ outlook on their future trading prospects dropped one point to 25%, and their optimism in the wider economy also fell by one point to 5%.
Three UK regions and nations recorded a month-on-month increase in optimism in September. Along with Scotland, London (up 12 points to 33%) and the South East (up 15 points to 15%) both reported higher confidence readings, with London now the most optimistic region overall. Only Wales (down five points to -4%) recorded a negative overall confidence reading in the last month.
Chris Lawrie, area director for Scotland at Bank of Scotland, said: “It’s encouraging to see business confidence in Scotland back on the rise, despite the myriad of economic headwinds the country’s firms continue to face.
“It’s also pleasing to see businesses here planning to invest in their people and continue to evolve the services they offer as they target new opportunities to grow. At this challenging time, companies must also keep a close eye on cash flow to help mitigate any major turbulence ahead and ensure they’re ready to capitalise on opportunities to scale up as they arise.”
Business confidence rose by two points in both the retail and service sectors (15% and 17% respectively), however both these figures are close to 12-month lows. Manufacturing and construction firms saw their lowest levels of business confidence this year, down two points in manufacturing to 14% and down 16 points to 10% in construction. This was driven by overall falling optimism in the economy.
Scotland only: Paul Gordon, Managing Director for SME and Mid Corporates, Lloyds Bank Commercial Banking, said: “Firms should take heart that nationally, business confidence has stabilised, while recognising that wage pressures may continue for some time.
“However, it is important to note that this data was collected ahead of the recent Fiscal Statement and the current market volatility, where the effect on confidence will be seen in next month’s data.
“Keeping a watchful eye on out-goings, especially energy bills as we head into the winter months, will ensure businesses are in the best possible position and right now businesses will be taking on board what the currency position means for their business models.
“While capital and cash flow management are undoubtedly vital during this time, we would encourage businesses to reach out to their networks for support if they find themselves struggling. At Lloyds we remain by the side of businesses to help deliver the support firms needs to navigate these challenging times.”
Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said:“It is encouraging to see business confidence stabilising after a three-month decline.
“Firms’ assessment of their own trading prospects also remained steady and continues to show some resilience during turbulent times. Yet, cost pressures remain, as more businesses look to raise prices to help protect their margins while wage pressures show little sign of abating at this stage.
“With the recent volatility in financial markets as well as the Government’s Growth Plan and energy cap announcements, it will be interesting to see how these measures affect business confidence.”
Bank of Scotland’s Business Barometer for August 2022 shows:
· Business confidence in Scotland fell 11 points during August to 5%
· Country’s firms identify top growth opportunities as diversifying into new markets (30%), evolving their offering (30%) and investing in their teams (27%)
· Overall UK business confidence fell nine points during the last month to 16%, its lowest level since March 2021, with only three out of 11 nations and regions recording a higher reading than July
Business confidence in Scotland fell 11 points during August to 5%, according to the latest Business Barometer from Bank of Scotland Commercial Banking.
Companies across the country reported lower confidence in their own business prospects month-on-month, down 29 points at 3%. When taken alongside their optimism in the economy, down 5 points to -6%, this gives a headline confidence reading of 5%.
Scottish businesses identified their top target areas for growth in the next six months as diversifying into new markets (30%), evolving their offering (30%) and investing in their teams (27%).
The Business Barometer, which questions 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
A net balance of 10% of businesses in the region expect to increase staff levels over the next year, up 5 points on last month.
Overall UK business confidence fell nine points during August to 16%, its lowest level since March 2021. Firms’ outlook on their future trading prospects was down 32 points to 5%, and their optimism in the wider economy dropped six points to 6%. The net balance of businesses planning to create new jobs also decreased five points to 16%.
While every UK region and nation reported a positive confidence reading in August (except the South East, where confidence dropped 15 points to 0%), only three recorded a month-on-month increase in optimism. The three regions were the North West (up 26 points to 44%), South West (up 12 points to 23%) and Yorkshire (up nine points to 23%), with the North West now the most optimistic region overall.
Fraser Sime, regional director for Scotland at Bank of Scotland Commercial Banking, said: “Ongoing pressures around rising costs are clearly continuing to impact Scottish businesses but, despite this month’s dip, that confidence remains in positive territory is evidence of firms’ resilience.
“At times like these, businesses need to keep a close eye on cash flow to help mitigate turbulence in the months ahead. It’s encouraging to see businesses continuing to target new growth opportunities, with nearly a third planning to diversify into new markets.
“We’ll remain by the side of Scottish firms to help them successfully navigate the challenging period ahead.”
Business confidence declined across all four sectors in August. Confidence within the retail sector declined the most this month (13%, down 18 points), with the service sector also seeing a significant nine-point decrease (15%). Other sectors saw moderate decreases, with manufacturing down by four points (16%) and construction (26%, a fall of two points), in line with recent trends.
Paul Gordon, Managing Director for SME and Mid Corporates, Lloyds Bank Commercial Banking, said: “With inflationary pressures growing, businesses will no doubt be looking to their supply networks along with tight control of costs and profit margins where they can.
“We know that rising costs are already dealing a heavy blow to businesses, but remaining agile to the changing economic environment will be vital for businesses in the months ahead.
“Firms must keep a tight watch on costs and structure their finances wisely, so they are in the best position possible. Businesses should try to remain flexible, and use the capital and cashflow available to them. At Lloyds we remain by the side of businesses to help deliver that support.”
Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said:“Business confidence declined for a third consecutive month as firms continue to face economic challenges in the period ahead and as inflation concerns intensify.
“Despite edging lower this month, the outlook for both wage and price pressures remains elevated. However, there are some brighter points as the demand for staff remains positive, and firms reported lower concerns about staffing issues and the pandemic.”
