Economic worries increase but Scottish firms find inner strength

Business confidence in Scotland fell three points during October to four per cent, according to the latest Business Barometer from Bank of Scotland Commercial Banking.

A net balance of nine per cent of Scottish businesses now say they are pessimistic about the economy, compared with a month ago, when a balance of one per cent said they were optimistic.

Despite this, companies in Scotland report higher confidence in their business prospects at 18 per cent, up five points, while a net balance of 13 per cent expect to hire more staff during the next year, up seven points on last month.

Across the UK, overall confidence fell 10 points to 19 per cent, its sharpest fall and its lowest level all year, as firms’ optimism about the economy slumped 18 points to just eight per cent. Companies’ confidence in their own business prospects fell three points to 29 per cent.

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

Across Scotland, a net balance of 28 per cent of businesses said they felt that the UK’s exit from the European Union was having a negative impact on their expectations for business activity, an increase of 22 points on a month ago.

Fraser Sime, director, SME banking, Bank of Scotland, said: “Ongoing uncertainty appears to be weighing heavily on businesses’ optimism for the economy across the UK.

“However, it’s slightly more encouraging to see firms reporting growing confidence in their own business prospects and an increase in hiring intentions. This suggests a resilience that may prove to be valuable as companies await greater clarity on the UK’s future trading relationship.”

Regional picture

Businesses in London showed the most confidence, at 37 per cent, ahead of the North West (36 per cent) and the West Midlands (23 per cent).

Those in the South West were the least confident, with an overall confidence of just two per cent, 17 points below the national average.

Sectors

Overall confidence fell significantly in construction (22%, down 19 points) and manufacturing (21%, down 10 points). It also declined in consumer services (29%, down 4 points) and other services (15%, down 9 points).

Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said: “Business confidence is continuing to fall as firms become less optimistic about the wider economy, and is impacted by the mixed rhetoric on the progress being made in the ongoing EU-UK negotiations.”