SCOTTISH BUSINESS CONFIDENCE DIPS BUT REMAINS POSITIVE
- Business confidence in Scotland fell 18 points during July to 32%
- Scottish businesses identified their top target areas for growth in the next six months as evolving their offer (44%), investing in their team (38%) and entering new markets (33%).
- Overall, UK business confidence dipped six points to 31%, with nine out of 11 regions and nations reporting a lower confidence level month-on-month
Business confidence in Scotland fell 18 points during July to 32%, according to the latest Business Barometer from Lloyds Bank Commercial Banking.
Companies in Scotland reported lower confidence in their own business prospects month-on-month, down 11 points at 41%. When taken alongside their optimism in the economy, down 27 points to 21%, this gives a headline confidence reading of 32%.
Scottish businesses identified their top target areas for growth in the next six months as evolving their offer (44%), investing in their team (38%) and entering new markets (33%).
The Business Barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
A net balance of 29% of businesses in the region expect to increase staff levels over the next year, down 20 points on last month.
Overall, UK business confidence dipped by six points to 31% in July, with nine out of 11 regions and nations reporting a lower confidence reading month-on-month.
Optimism in the economy has also fallen, dropping 11 points to 21%, the lowest levels since February this year.
However, firms remained resilient in their own trading prospects, with 43% of companies expecting business activity to increase over the next 12 months, up one point on last month and reaching a 14-month high.
Despite the fall in overall confidence, levels remain higher than the survey’s long-term average reading of 28% and every UK region and nation reported a positive confidence reading in July. The North East reported the highest levels of business confidence at 43% (down four points on last month), followed by Yorkshire (down seven points month-on-month) and the West Midlands (up two points month-on-month) both at 38%.
Retail was the only broad sector registering higher confidence (up six points to 35%), mostly reflecting stronger transport services.
The fall in overall business confidence this month was led by the service sector sentiment falling by seven points to 30%. While the fall in confidence was seen broadly across this sector, hospitality firms appeared to be more resilient.
Confidence also was lower in manufacturing (down 16 points to 34%) and construction (down eight points to 31%).
|Chris Lawrie, area director for Scotland at Bank of Scotland Commercial Banking, said:
|“While business confidence may be down this month, it’s brilliant to see that it’s still in positive territory, proof of the resilience of Scottish businesses who are managing headwinds including persistent high inflation.
“Despite the ongoing challenges, those in the country’s hospitality and leisure industry will be reaping the rewards from the uplift in tourism this summer, and those around Edinburgh will be preparing for the Fringe Festival in the hope of a welcome boost in trade. With another bank holiday on the horizon, firms will need to manage their working capital closely to ensure they are ready for peaks in demand, and ready to take advantage of any opportunities that arise.”
|Paul Gordon, managing director for SME and Mid Corporates at Lloyds Bank Commercial Banking, said:
|“It’s not surprising that the challenging economic environment is continuing to weigh heavily on businesses and reduce their overall confidence. However, the resilience in their trading prospects, pricing and wage expectations is more encouraging.
“Increased spending in the retail sector is clearly having a positive impact and as we look ahead into the second half of the year, I am sure that businesses will be starting to gear up for the months ahead and ultimately to the busy Christmas season. Managing costs, staffing and inventory during this time is crucial to savvy financial planning, and business should not hesitate to reach out for business support should they require it.”
|Hann-Ju Ho, Senior Economist Lloyds Bank Commercial Banking, said:
|“The Barometer presents a complex picture for firms this month, with the data showing that trading prospects remain strong with businesses feeling under less pressure by inflation to raise prices. However, there is clearly uncertainty about the wider economy and rising interest rates. This may be causing net hiring intentions to moderate slightly. Nevertheless, wages and jobs growth continue to support staff with the current cost of living.
“However, the sectoral analysis this month shows some positive signs for the retail sector, while there are indications that pent-up demand may be boosting confidence in tourism and travel. As businesses continue to adapt to the economic environment, we expect to see ongoing resilience broadly across all sectors.”