Scottish firms’ confidence rises but remains near record low
Bank of Scotland’s Business Barometer for May 2020 shows:
- Overall confidence for firms in Scotland rose 17 points in the past month to -33%
- Firms’ confidence in their own business prospects was -26%, compared with -29% in April
- Growing number of firms experienced an increase in demand for goods and services
Business confidence in Scotland rose 17 points during May to -33%, remaining near record lows, according to the latest Business Barometer from Bank of Scotland Commercial Banking.
Companies in Scotland reported higher confidence in their own business prospects than in April at -26%hen taken alongside their views of the economy overall, this gives a headline confidence reading of -33%.
The Business Barometer questions 1,200 businesses monthly and provides early signals about UK economic trends both regionally and nationwide.
In an illustration of the impact COVID-19 is having on Scotland’s business, the majority of firms continued to see demand negatively affected during May, but with the picture improving slightly since April. 65% experienced a fall in demand for their products and services, down seven points on the month before. Meanwhile, 12% experienced an increase in demand, up on 5% in April.
The number of Scottish firms operating at less than 50% capacity increased 18 points to 43%. A fifth of firms (20%) weren’t operating at all, down from 32% in April.
Of the 75% of businesses reporting disruption to their supply chain during May, 19% expected the situation to improve within three months, while 14% expected it would take more than 12 months to return to normal levels.
Fraser Sime, regional director for Scotland at Bank of Scotland Commercial Banking, said: “Scottish firms have been hit hard by this crisis, but they’re showing resilience in the face of great challenge. It’s encouraging to see that some businesses are beginning to reopen as demand creeps back. We’re standing shoulder-to-shoulder with companies from all sectors to help them overcome the challenges presented during this difficult time.”
Across the UK, business confidence held steady month-on-month, dipping just one point to -33%. The North East and London both saw confidence rise month-on-month, scoring the joint-highest confidence reading at -20%. The South West recorded lowest confidence at -51%, compared to -35% the month prior.
From a regional perspective, despite all being in negative sentiment, six of the 12 regions reported a higher confidence in May. The North East was the least negative region at -20%. The South West was the most negative region at -51% followed by the South East at -45%.
In May, the construction sector saw the sharpest decline, falling 24 percentage points to -44%. However, all the three other major sectors saw a modest increase. The retail sector increased eight points to -25%, while manufacturing rose to -27% and services saw a small increase of four points to -18%.
Paul Gordon, Managing Director for SME and Mid Corporates, Lloyds Bank Commercial Banking, said: “While May continued to show the unprecedented impact of the shutdown for businesses across the UK, it is important to see that now half of all regions are climbing back from the lowest levels seen last month. As Britain sees further easing of measures in the coming weeks, with more businesses re-opening, it is hoped that this will further improve businesses’ confidence. Government schemes and finance options continue to be made readily available to businesses so that they can be best placed and prepared to open once again in the months ahead.”
Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said: “Despite the results partly capturing the period since the Government’s announcement of an initial easing of restrictions, trading conditions remain difficult for most firms. Nevertheless, a further relaxation of constraints will enable more businesses to resume their activities.”