Scottish business confidence slips but 2024 offers reasons to be cheerful as more firms look to hire

Confidence levels fell ten points during December to a net reading of plus 31 per cent, according to the latest business barometer from Bank of Scotland Commercial Banking. Firms reported lower confidence in their own business prospects, month on month, down seven points at 44 per cent. When taken alongside their general optimism in the economy, down 14 points to 18 per cent, this produces the headline confidence reading of 31 per cent.

The barometer report, which surveys some 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide. Scottish businesses identified their top target areas for growth in the next six months as evolving their offering, investing in their teams and entering new markets. A net balance of 30 per cent of businesses in Scotland expect to increase staff levels over the next year, up five points on the previous month.

Overall UK business confidence fell two points in December to 35 per cent, marking the first decrease since August, driven largely by firms’ outlook on the overall UK economy which slumped by 11 points from 38 per cent to 27 per cent. Businesses’ optimism in their own trading prospects also decreased, but less markedly so - by five points to 43 per cent.

The West Midlands and East Midlands were the only regions to report an increase in confidence, up one point to 33 per cent and up five points to 34 per cent respectively. The north east of England was the most confident, remaining at 48 per cent for the second consecutive month, followed by the east of England (45 per cent), London (38 per cent) and the south west (36 per cent).

Martyn Kendrick, regional director for Scotland at Bank of Scotland Commercial Banking, said: “While we’ve seen a dip in confidence from businesses in Scotland, we’re still seeing strong figures at 31 per cent, just four points below the national average. With the festive season keeping many businesses busy, it’s encouraging to see them thinking positively about the year ahead with trading prospects one point higher than the UK average.

“For those planning to invest in their teams and evolve their offer, now is a perfect time to think about cash flow to ensure they enter the new year on steady footing, ready to capitalise on new upcoming opportunities.”

Paul Gordon, managing director for SMEs [small and medium-sized enterprises) and mid corporates at Lloyds Bank Commercial Banking, said: “This December data was collected following several key announcements, including energy prices rises and the UK economic outlook being revised down in the Autumn Statement. All of this will undoubtedly have had an impact on business confidence as we head into 2024.

“Businesses are also balancing cost pressures with a challenging labour market that will see increases to the minimum wage in April 2024, as perhaps indicated in the wage growth figures, at a time when they are managing staff retention and recruitment decisions. However, over the course of the year confidence has steadily increased.”