Domestic sales and exports have seen the biggest falls since accountancy body ICAEW began its business confidence monitor survey in 2004.
However, the snapshot for the first quarter of 2021 found that business confidence was back in positive territory, likely related to optimism surrounding the rollout of coronavirus vaccines and the hope that this will support a return to more normal trading conditions.
Conditions remain difficult for many Scottish businesses, the survey noted. Issues with customer demand are widespread, with just under half of firms citing it as a growing problem.
The proportion of companies in Scotland reporting late payments as a growing problem has increased over the last 12 months, from 18 per cent to just over a third.
Meanwhile, one in three Scottish businesses said it had been affected by transport issues. Travel restrictions brought in to curb the spread of the virus and Brexit-related delays at ports likely contributed to these problems, the report noted.
More businesses in Scotland were found to be operating below capacity than anywhere else in the UK.
Looking ahead, employment in Scotland is forecast to rise by 1.9 per cent this year after the fastest decline in a decade, while profits are expected to nudge up by 3.9 per cent, on average.
Companies have forecast domestic sales and exports to increase this year, by 4.6 per cent and 3.6 per cent respectively.
David Bond, ICAEW regional director for Scotland, said: “It is telling that Scottish businesses saw the biggest falls in domestic sales and exports since we started surveying them more than a decade ago; while business confidence is in positive territory thanks to the vaccine rollout, it demonstrates that it has been a tough year. “Alongside the vaccine rollout, Scottish companies tell us they expect sales, profits and employment to rise this year, which is good news for our businesses.”
He added: “We want to see the UK Budget focus on providing a bridge to sustainable and resilient economic recovery, getting people back into work, helping exporters, and greater investment in digital technology to make our businesses competitive in the 21st century.”
Businesses in Scotland reported that domestic sales fell 3.5 per cent year-on-year, the sharpest rate of decline across the UK, while exports fell by 1.7 per cent in the same period.
More than 50 chartered accountants based in Scotland responded to a telephone survey as part of the UK-wide report.
The survey comes hot on the heels of the latest Bank of Scotland Recovery Tracker, which found that while the pace of the UK’s economic recovery fell behind a global benchmark last month, the vaccine rollout had boosted growth prospects for the months ahead.
Ten of the 14 sectors monitored anticipated stronger output growth in the UK than their global peers over the next 12 months, as the UK’s Covid-19 vaccination programme outpaces other major economies.