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.”