Scotland 'taking great steps towards recovery' as business confidence grows

Business confidence in Scotland rose six points during August, with the nation “taking great steps towards recovery and growth”, according to a new report from Bank of Scotland.

The lender’s commercial banking arm has published its latest Business Barometer, saying optimism among companies grew to 34 per cent, with overall confidence in the economy also rising by 20 points to 43 per cent, as the full easing of lockdown restrictions in Scotland in the month was a “clear boost” for firms.

Companies in Scotland reported marginally lower confidence in their own business prospects month on month, down eight points at 25 per cent, according to the study, which questions 1,200 businesses monthly and “provides early signals about UK economic trends both regionally and nationwide”.

A net balance of 20 per cent of businesses in the region expect to grow staff levels over the next year, up seven points on last month.

Fraser Sime of Bank of Scotland Commercial Banking highlights firms feeling optimistic. Picture: Lisa Ferguson.

Overall UK business confidence rose six points in August, reaching 36 per cent, the highest level recorded since May 2018. When asked about their overall trading prospects, firms reported a six-point increase on July’s reading at 34 per cent and firms’ confidence in the economy also increased six points to 39 per cent.

Bank of Scotland added that all UK nations and regions had a positive confidence reading in August – with North-west England scoring the highest at 64 per cent.

Fraser Sime, regional director for Scotland at Bank of Scotland Commercial Banking, said: “With most of the Covid-19 restrictions easing in August, businesses across Scotland were able to return to normal trading for the first time in 18 months and are feeling optimistic about what this means for the economy.

“With confidence on the up and even more firms are now planning on making new hires, the country is taking great steps towards recovery and growth. We’ll continue to support businesses through the coming months as they aim to capitalise on this positive momentum.”

In sector terms, services confidence saw the greatest month-on-month increase, rising by eight points to 36 per cent, the highest level since January 2018. Confidence in both manufacturing and construction also gained momentum (both up seven points to 40 per cent), led by rises in trading prospects for the year ahead.

Disruption

The increase in manufacturing confidence came despite ongoing supply disruptions, although the level remains below the high in May, the lender added. Retail confidence posted a smaller two-point rise to 34 per cent, staying below the recent peak in May.

Gareth Oakley, MD for business banking, Lloyds Bank, said: “It is clear there is still some level of uncertainty on inflation and the impact of price pressures, but with further boosts to confidence in the services, manufacturing and construction sectors we can be hopeful that demand across all sectors will drive consumption throughout the rest of the year. The last few months of the year will be pivotal to the future of UK economic growth.”

Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, cheered business confidence reaching its highest level in more than four years.

“Staff shortages remain a challenge, but as the economy moves back towards pre-pandemic levels we can be optimistic that the momentum for business confidence and economic optimism can be sustained in the months ahead.”

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