The latest Business Barometer report from Bank of Scotland Commercial Banking showed business confidence in July also fell more sharply than in the UK as a whole.
Scottish business confidence fell 14 points to a net positive balance of 28 per cent in July, compared to a 3 per cent dip to 30 per cent UK wide.
The number of firms in Scotland planning to increase staffing levels over the next 12 months dropped by five points to 13 per cent.
Fraser Sime, regional director for Scotland at Bank of Scotland Commercial Banking, said the decision by the Scottish government to postpone the complete easing of lockdown restrictions “may have a part to play in the subdued confidence among Scottish firms”.
“But while business optimism has taken a hit, the overall picture is still positive and we know many firms, particularly those in the hospitality and tourism industry are gearing up to re-open fully and take advantage of what will hopefully be a busy summer season,” he said.
Confidence fell slightly across economic sectors in line with the overall economic picture. Manufacturing and retail confidence declined for a second month from previously elevated levels. Nevertheless, at 33 per cent (down from 35 per cent) for manufacturing and 32 per cent (down from 36 per cent) for retail, confidence remains at historically strong levels. Construction and services sector confidence also dipped to 33 per cent (from 35 per cent) and 28 per cent (from 31 per cent), respectively.
In the subsectors, confidence was particularly strong in hospitality (63 per cent, up from 38 per cent), and transport (53 per cent, up from 37 per cent), reflecting the further opening of the economy, as well as in business services & finance. Employment and pay growth expectations were also especially strong in these subsectors as well as in construction.
The Business Barometer questions some 1,200 businesses each month to provide early signals about UK economic trends both regionally and nationwide.
Alongside Scotland, east of England and Wales reported the biggest falls in confidence but all retained an overall positive reading.
The number of UK firms expecting planning to create new jobs in the next 12 months rose one point to 18 per cent in July, the highest reading since November 2018 and the sixth consecutive month that employment expectations have risen.
Paul Gordon, managing director for SME and Mid Corporates for Lloyds Commercial Banking, said although there had been a fall in business confidence in eight of the UK’s regions and nations in July, the recent trend has been for an improvement since the start of the year.
“There remains a fair degree of uncertainty on employment, skills, international trade and inflation, but with both retail and manufacturing confidence at historically high levels and the strengthening of the hospitality and transport sectors, reflecting the further opening of the economy, we should be cautiously confident about the coming months,” he said.