Scottish business optimism on the rise despite uncertain future

Scottish business leaders are more optimistic for the future now than they were towards the tail end of 2020, a major survey of hundreds of firms indicates.

David Kirchin, head of Scotland at Addleshaw Goddard: 'We can’t ignore the impact the ongoing health pandemic and Brexit has cast over the Scottish business community' Picture: Renzo Mazzolini

Despite the uptick in sentiment, the latest Addleshaw Goddard Scottish Business Monitor still highlights feelings of uncertainty with a large minority of firms expecting a reduction in volume of business and employment.

The study – produced in partnership with the Fraser of Allander Institute – suggests that many businesses remain unsettled as the impact of Covid-19 and the UK’s new trading arrangements with the EU creates nervousness across all sectors.

The Scottish construction sector has experienced a period of growth and recovery going from the sector with the lowest sentiment in spring 2020 to the highest sentiment in the fourth quarter of the year.

However, the latest results highlight the continued challenges the hospitality and accommodation sectors face, with more than one in ten businesses reporting their chance of survival over the next six months as unlikely or very unlikely. This is just less than double the national average.

Business ratings of how the Scottish and UK governments have handled the public health crisis have remained unchanged over the quarter. However, ratings on understanding the challenges that businesses face and supporting firms through the pandemic have fallen slightly for both Westminster and Holyrood.

Mairi Spowage, acting director at the Fraser of Allander Institute, said: “The Scottish economy is still in the midst of a crisis, with large amounts of uncertainty in the outlook.

“This survey marks a year of negative sentiment in the Scottish business base, the first time we have seen that since the financial crisis. However, optimism has improved since late 2020.

“Changes in the way many sectors are working will have long-term implications for the Scottish economy. Many businesses are concerned that home working is impacting negatively on staff management and productivity, whilst plans to permanently reduce office footprint will have implications for town and city centres.”

David Kirchin, head of Scotland at Addleshaw Goddard, said: “We can’t ignore the impact the ongoing health pandemic and Brexit has cast over the Scottish business community. Perhaps unsurprisingly, most firms are expecting Scottish economic growth to be weak in 2021 with only 8 per cent of respondents expecting strong or very strong growth in the coming 12 months.

“Whilst the future certainly holds challenges for thousands of businesses, we must take some positivity from the latest findings as the majority of respondents (60 per cent) report having secure levels of cashflow over the next six months.

“Our experience is that businesses are now taking practical and realistic steps to strengthen their balance sheets not only to weather the current climate, but also in readiness for future opportunities when activity levels increase.”

The survey, which was conducted with more than 500 firms, found that since the last quarter, more businesses are reporting that home working has affected performance management of staff and productivity levels. There has also been an increase in those expecting to permanently reduce their office footprint.

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