‘Scottish firms aren’t standing still’ - why business confidence is on the rise

Confidence levels rose four points during February to 41 per cent, according to the latest business barometer from Bank of Scotland, part of Lloyds Banking Group.

While companies north of the Border reported lower confidence in their own business prospects month-on-month, down 12 points at 41 per cent, their optimism in the economy surged 20 points to 41 per cent. Taken together, this gives a headline confidence reading of 41 per cent, up from 37 per cent in January.

A net balance of 45 per cent of businesses in Scotland expect to increase staff levels over the next year, up three points on the previous month.

Looking ahead to the next six months, Scottish firms identified their top target areas for growth as introducing new technology, such as artificial intelligence (AI), automation or digitalisation, investing in their team, for example through training, and entering new markets.

The barometer, which surveys some 1,200 businesses monthly and has been running since 2002, provides early signals about UK economic trends both regionally and nationwide.

Overall, UK business confidence was unchanged since January at 44 per cent.

Martyn Kendrick, Scotland director at Bank of Scotland Commercial Banking, said: “It’s encouraging to see business confidence in Scotland rise again in February. Scottish firms aren’t standing still - they’re embracing innovation and new technologies to support their growth plans over the months ahead.”

London was the most confident UK nation or region in February (59 per cent), followed by the north west of England (58 per cent) and Northern Ireland (also 58 per cent).

Hann-Ju Ho, senior economist, Lloyds Commercial Banking, said: “It’s encouraging to see optimism in the wider economy returning, although with a small reduction in firms’ confidence in their own trading prospects.

“The majority of the survey results were collected following the Bank of England’s close decision to hold interest rates at its February meeting, signalling potential easing ahead, which may have alleviated business concerns, including those around cost pressures.”

Meanwhile, some four in five Scottish small business owners (81 per cent) say business worries are keeping them awake at night, as concerns over economic volatility and geo-political uncertainty reach a record high, according to research from lender Novuna Business Finance.

The biggest concerns for company owners relate to general economic volatility and tax and interest rates - a worry that has been more prevalent among small business owners since the hike in national insurance contributions took effect last April.

Joanna Morris, head of insight at Novuna Business Finance, said: “When business owners are kept awake at night working through enterprise issues, we gain a sense of the intensity of some of these concerns for entrepreneurs.

“Further, our research suggests that sleepless nights are not just confined to businesses that are struggling to grow. Managing fast paced or significant growth can also be stressful for established businesses.

“Among those enterprises surveyed that predicted significant expansion this quarter, there was a significant rise in the percentage of business owners that said business worries kept them awake at night.”