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Scottish business confidence leaps in June – Bank of Scotland Business Barometer

Posted: 7th July 2023
  • Business confidence in Scotland rose 28 points during June to 50%
  • Scottish businesses identified their top target areas for growth in the next six months as evolving their offer (41%), investing in their team, and entering new markets (both 34%)
  • Overall, UK business confidence rose nine points to 37%, with all regions reporting a positive confidence reading

Business confidence in Scotland rose 28 points during the beginning of June to 50%, according to the latest Business Barometer from Bank of Scotland Commercial Banking.

Companies in Scotland reported higher confidence in their own business prospects month-on-month, up 22 points at 52%.  When taken alongside their optimism in the economy, up 34 points to 48%, this gives a headline confidence reading of 50%.

Scottish businesses identified their top target areas for growth in the next six months as evolving their offer (41%), investing in their team, and entering new markets (both 34%).

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

A net balance of 49% of businesses in the region expect to increase staff levels over the next year, up 20 points on last month.

National picture

Overall, UK business confidence increased by nine points to 37% in June, with all regions reporting a positive confidence reading. Eight out of 10 regions reported a higher confidence reading than in May.

The East Midlands reported the highest levels of business confidence at 52% (up 35 points on last month), the highest level of any UK region or nation this year. Scotland reported the second highest confidence reading, followed by the North East at 47% (up 12 points month-on-month) and Yorkshire at 45% (up 26 points month-on-month). London and the South West were the only regions to report a decline in confidence. In London confidence fell by 10 points to 33%, while in the South West it fell by one point to 29%.

Business confidence for firms in the service sector rose to 37% (up 11 points), the highest seen since February 2022. With the recent spell of good weather and a reduction in food and energy prices, businesses in leisure and hospitality may be able reap the rewards in the months to come.

Manufacturing firms’ confidence also increased to its highest level since early 2022, rising to 50% (up 10 points) to outperform other sectors.

Chris Lawrie, area director for Scotland at Bank of Scotland Commercial Banking, said:

“It’s great to see confidence among Scottish firms on the rise. Many businesses will be looking forward to a busy summer period, especially with large events like the Edinburgh Fringe on the horizon which will no doubt bring excellent trading opportunities for the hospitality and leisure industry.

“It’s encouraging to see leadership teams looking to evolve their offering and making plans to invest in their colleagues too. This should go hand in hand with carefully managed working capital to ensure that businesses have the financial headroom to go after the growth opportunities that come their way.”

Paul Gordon, managing director for SME and Mid Corporates at Lloyds Bank Commercial Banking, said:

“The boost in confidence and hiring intentions is a welcome sign that businesses are managing well in what continues to be a challenging environment.

“It’s particularly pleasing to see that for both services and manufacturing, two sectors which have been hardest hit in recent years, there is real optimism for trading prospects and growth. However, wage pressures continue to be above pre-pandemic levels and firms need to be mindful of this and ensure that costs are evenly distributed and managed closely.”

Hann-Ju Ho, Senior Economist Lloyds Bank Commercial Banking, said:

“It’s encouraging to see business confidence rebounding following last month’s five-point dip to 28%. Trading prospects and optimism have seen a resurgence this month with overall confidence up in all but two of the twelve regions of the UK, which shows positive prospects across the wider economy.

“However, interest rate rises and cost pressures are still felt by many and we await to see the impact of the latest 50 basis point rise in the base rate. Meanwhile, expectations for average pay growth, although down slightly this month, appear to have picked up compared with the start of the year and remain elevated relative to pre-pandemic levels.”

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