Call for action after business confidence sinks

Politicians and industry bosses have been urged to take 'collaborative action' after survey results today showed a 'disappointing' return to negative levels of Scottish business confidence in the latest quarter.

Grant Thornton said the oil and gas downturn in Aberdeen had 'far-reaching consequences' for the wider Scottish economy. Picture: Ian Rutherford

They were found to be among the lowest in the UK, falling into negative territory for the first time in 12 months, according to the latest business confidence monitor from accountancy body ICAEW and Grant Thornton.

The study found that Scottish firms registered a confidence score of -7 for the three months, down from +10.4 in the previous quarter and much closer to the -7.4 recorded for the second quarter of 2015.

More general weakness in domestic demand was seen as a potential drag in confidence levels, with the report noting that last year the trend in Scotland was for domestic sales growth to slow, with the second quarter of 2016 remaining “subdued” with year-on-year growth at 2 per cent.

“Furthermore, companies expect this low level of expansion to continue in the year ahead, with expectations of a rise of only 1.7 per cent in domestic sales in the coming 12 months,” the report said, also noting a 0.3 per cent year-on-year drop in employment “and expectations of a further 0.4 per cent fall in the year ahead”.

Grant Thornton UK’s managing partner in Scotland Kevin Engel said: “It’s troubling to see such a dip in confidence levels, but also understandable, given the level of political and economic uncertainty facing the nation.

“Our findings follow a prolonged downturn in Aberdeen’s oil and gas market, which has far-reaching consequences throughout the wider Scottish economy.

The positive news is that the energy sector looks to be slowly turning the corner with potential recovery in sight.

“In the meantime, what is urgently needed is collaborative action from politicians and business leaders to tackle other serious issues, including halting the decline in exports and creating world-class physical and digital infrastructure.”

Andrew Hewett, president of ICAEW Scotland, said: “After seeing confidence stabilise last quarter, it is disappointing to see it return to negative levels this time around.

“There are, however, many factors that may have led to this, from the on-going impact of the problems within the oil and gas sector, to the uncertainty that is often seen around an election.”