Scottish business confidence soars on vaccine news

The start of the vaccine rollout has seen a sharp improvement in confidence levels among Scottish firms but uncertainty over lockdown restrictions could see such optimism falter in the months ahead, according to a closely-watched report.

Bank of Scotland's Fraser Sime said the report's findings were a step in the right direction but a long road lies ahead. Picture: contributed.

Bank of Scotland’s Business Barometer index for December, which is published today, said the confidence of firms in Scotland rose 29 points in the past month to the highest level since the pandemic took hold in March. Although the gain also represents the strongest improvement of any region or nation in the UK, the overall sentiment of Scottish firms over future prospects still remains negative.

Scottish companies’ optimism towards the economy increased by 38 points month on month to a net balance of -12 per cent, while confidence in their own business prospects rose 20 points to -7 per cent. Together, this gives a headline confidence reading of -9 per cent.

Businesses’ hiring intentions showed that a net balance of 33 per cent of businesses in Scotland expect to reduce staff levels over the next year, a fall of 10 points on last month.

Fraser Sime, Scottish regional director for the bank’s commercial banking arm, said: “To see an increase in the confidence of Scottish businesses is a step in the right direction as we come to the end of what has been a very difficult year. The rollout of the vaccine should buoy spirits further as it helps to bring light to a Covid-19 exit strategy, but this optimism could falter in coming months with continued uncertainty over lockdown restrictions.”

UK-wide, the report showed that overall confidence saw its largest monthly increase for more than four years in December, following vaccine progression announcements.

Companies in three of 12 UK nations and regions returned to a net optimistic position for the first time since March.

As well as Scotland, the South-west and the West Midlands saw the biggest gains in confidence levels.

The North-east, South-west and West Midlands all moved into net positive territory for the first time since March this year.

In the industry sectors, confidence reached the highest levels seen since the start of the pandemic. Manufacturing reported a strong rebound despite looming uncertainty during the survey period about the UK’s new trading arrangements with the EU and construction also saw a healthy rise in confidence.

Although the retail sector reported an 11-point lift in confidence, optimism remains below the long-term average heading into the key Christmas trading period, the report said.

Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, said: “The news of the vaccine progress has bolstered this month’s confidence figures, more than offsetting uncertainties around the UK’s new trading relationship with the EU. While confidence remains below average and significant challenges lie ahead, it is heartening to conclude a challenging year with a notable improvement in business sentiment and with the positive momentum hopefully continuing into 2021.”

The Business Barometer questions 1,200 businesses monthly and aims to provide early signals about UK economic trends both regionally and nationwide.

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