Scottish business confidence at record high

CONFIDENCE among businesses in Scotland has hit new heights, and is greater than the UK average, according to a new report.

Shoppers on Edinburgh's Princes Street. Picture: TSPL

The latest ICAEW/Grant Thornton UK business confidence monitor (BCM) recorded a confidence index score among firms of +38 in the current quarter of the year. This indicates a 38 per cent difference between businesspeople feeling confident about the coming year and those feeling unconfident.

The new figure is almost 10 points from +28.5 in the final three months of last year.

The Scottish score is slightly above the UK average of +37.2, which was also described as a record high.

The “strong” performance is partly linked to increasing levels of customer demand, the report shows, while average salaries are forecast to grow over the next 12 months.

‘Accelerated growth’

Scottish businesses reported that growth has accelerated in several key financial performance indicators over the last year, the BCM findings show.

In the year to the first quarter of 2014, gross profits and turnover have “risen markedly and are significantly up on one year ago” - described as “a clear sign of Scotland’s robust recovery”.

These high growth rates are expected to continue over the coming 12 months.

The report stated: “Business confidence in Scotland has risen to a record high this quarter as the Scottish economy grows.”

The BCM found that increasing levels of demand from customers are helping to support the economic recovery.

The proportion of Scottish businesses reporting that demand has become a greater challenge over the year to this quarter stood at 9 per cent, significantly down on the 48 per cent seen a year ago.

Overall, businesses reported that headcounts have risen by 3.4 per cent over the year and that salaries have increased 3 per cent during the same period.

Salary growth is expected to continue over the coming year, as competition for labour intensifies, the BCM found.

A number of businesses reported signs of a potential skills shortage. The proportion of Scottish businesses saying that the availability of non-management skills has become a greater challenge over the past year stood at 25 per cent in this quarter, up on the 10 per cent seen a year ago.

‘Increase in all sectors’

Grant Thornton UK’s Scotland managing partner Andrew Howie said: “One of the most striking findings in the latest business confidence monitor is the increase in confidence across all key sectors, driven partly by a rise in consumer demand.

“The economic downturn forced Scottish businesses to reassess their business practices. What we’re now witnessing is positive economic results led by collaboration, innovation and a greater focus on fuelling growth internationally.

“The findings should be broadly welcomed, but ongoing economic difficulties in the eurozone and a slowdown in growth in developing nations - it’s important for Scottish companies to stay focused on driving sustainable long term growth.”

The monitor also showed that companies are more willing to invest as they become more confident about the future, and that financing has become easier for companies in Scotland.

ICAEW Scotland president Paul Adderley said: “It’s hugely encouraging to see such high levels of confidence here in Scotland - in a quarter when the UK average reached a record level, for the Scottish score to be even marginally above that is very positive news.

“The challenge, of course is to sustain and build upon this going forward, but the signs are that this is something that many businesses currently feel ready to face.”