CONFIDENCE DROP FOR SCOTTISH BUSINESSES

Business confidence in Scotland fell 15 points during January to -4%, according to the latest Business Barometer from Bank of Scotland Commercial Banking.

Companies in Scotland reported lower confidence in their business prospects at -2%. When taken alongside their views of the economy, this gives an overall confidence of -4%.

Businesses’ hiring intentions showed that a net balance of 3% of businesses in Scotland expected to reduce staffing levels during the next year, compared to 3% expecting to take on more staff last month.

Across the UK, overall confidence rose 13 points to 23% as firms’ optimism in the economy soared 22 points to 24%, while confidence in their own prospects increased four points to 22%.

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

Fraser Sime, regional director for Scotland at Bank of Scotland, said: “It’s evident that levels of uncertainty among Scottish businesses remain elevated. Despite this month’s dip in confidence, it’s encouraging to see opportunity on the horizon, including the COP26 United Nations climate change summit, which is being hosted in Glasgow later this year. That will shine a spotlight on sustainability in Scotland and the great businesses that are working to become greener.

“We’ve also announced our own ambition to reduce the carbon emissions we finance by more than 50% by 2030. This will promote the kind of sustainable practices that will help Scottish firms prosper for years to come.”

Across Scotland, a net balance of 19% 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, up eight points on a month ago.

Businesses in London had the highest confidence at 38% this month, ahead of the South West at 34%, and the East Midlands at 31%.

National overview

 

In January, overall business confidence saw a marked improvement in the construction and services sector with construction increasing 15 points to 27%, while services increased 17 points to 21%. Confidence in the retail sector increased by two point to 24%, while the manufacturing sector saw a decrease of six points to 21%

Paul Gordon, Managing Director for SME and Mid Corporates, Lloyds Bank Commercial Banking, said: “It is hugely encouraging to see a significant increase in business confidence for firms up and down the UK. London had a particularly strong start to the year, which could be businesses’ positive reaction to greater political and economic certainty. It is also encouraging to see both the South West and East of England posting significant strides. However, Scotland saw a sharp decline, moving the region into negative sentiment. The overall buoyed results are also reflected by improvements in three of the four sectors and we hope that more businesses plan for growth as we continue into 2020.”

 

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Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “After a turbulent 2019, it is encouraging to see a solid rise in overall business confidence to start the new decade. These results, if sustained, could signal a stronger economic growth at the start of 2020, although risks to the central outlook remain.”