Business confidence in Scotland at highest level since 2014, but trails UK - ICAEW report

Business confidence in Scotland is at its highest level since 2014, boosted by the gradual reopening of the economy, a key report today suggests.

But, despite confidence levels being firmly in positive territory, they lag behind the rest of the UK, according to the latest ICAEW Business Confidence Monitor.

Companies are predicting domestic sales growth of 6.8 per cent over the next 12 months, which would be the fastest rate of growth in Scotland since the monitor began measuring in 2004. Businesses also expect exports to increase in the next year, but optimism trails the rest of the UK.

The accountancy body’s study also shows that Scottish businesses plan to start taking on more staff as the economy regains traction. Employee numbers are expected to rise by an average 3 per cent in the coming 12 months, and companies also anticipate that average total salaries will increase.

Despite Scottish business confidence levels being firmly in positive territory, they lag behind the rest of the UK, according to the latest ICAEW Business Confidence Monitor. Picture: Jeff J Mitchell/Getty Images

The survey identified a number of growing challenges. The rate of staff turnover was a worry for just over a quarter of companies, while the proportion of businesses that said the availability of management and non-management skills were growing challenges compared to 12 months ago was 24 per cent and 23 per cent respectively. Both rates were notably higher than in recent quarters.

David Bond, ICAEW regional director for Scotland, said: “These are positive findings for the Scottish economy, particularly the expected growth of domestic sales and exports.

“But our businesses tell us they continue to face challenges with recruitment and from complicated regulatory requirements.

“It is vital that, given Scotland’s economic recovery and concerns that the global health situation could deteriorate in the autumn, businesses are not hit with additional costs as support schemes, such as furlough, are wound down.”

The proportion of Scottish companies citing regulatory requirements as a growing source of difficulty stands at 45 per cent, compared to the UK average of 40 per cent. The ICAEW said this increase could be due to the difficulties that some companies had in adjusting to Covid-related restrictions, and to post-Brexit customs changes.

Across the UK, business confidence reached a record high for the second quarter running. This was underpinned primarily by expectations of strong sales growth in the year ahead, especially in the domestic market where a record rise of 7.4 per cent is predicted.

A survey by Bank of Scotland released at the end of June suggested that Scottish businesses were the most optimistic in the UK after a sharp rise in confidence.

Business confidence jumped 27 points during June to 42 per cent, the Business Barometer from the Lloyds-owned bank revealed. This was the sharpest rise in overall confidence this year.

The Business Barometer samples the opinions of some 1,200 businesses across the UK monthly and provides early signals about economic trends both regionally and nationwide.

Companies in Scotland reported higher confidence in their own business prospects month-on-month, up 32 points at 42 per cent. When taken alongside their optimism in the economy, up 24 points to 43 per cent, this generated a headline confidence reading of 42 per cent.

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