30 Nov 2022
Business confidence in Scotland rose 19 points in November to 24% – the highest reading since July 2022 and highest of all UK nations and regions, according to the latest Business Barometer from Bank of Scotland Commercial Banking.
The survey was conducted between 1-15 November, before the Chancellor’s Autumn Statement announcement on Thursday 17 November.
Companies in Scotland reported higher confidence in their own business prospects month-on-month, up eight points to 30%. When taken alongside their optimism in the economy, up 30 points to 16% this gives a headline confidence reading of 24%.
Scottish businesses identified their top target areas for growth in the next six months as investing in their teams (43%), evolving their offering (40%), and introducing new technology (35%).
The Business Barometer, which questions 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
A net balance of 8% of Scottish businesses expect to increase staff levels over the next year, down eight points on last month.
Overall UK business confidence fell five points during November, but remained positive at 10%. Firms’ outlook on their future trading prospects was down two points to 25%, and their optimism in the wider economy dropped four points to -2%. Despite a seven-point dip, UK businesses remained positive about hiring intentions with 14% of firms aiming to create new jobs in the next 12 months.
All UK regions and nations, apart from the South East, reported a positive confidence reading in November, with seven recording a month-on-month increase in confidence. Of those recording an increase in confidence, Scotland, Wales (up 12 points to 17%) and the South West (up nine points to 5%) saw the largest monthly changes.
Chris Lawrie, area director for Bank of Scotland, said: “It’s encouraging to see confidence among firms in Scotland reach the highest in the UK, as they show their trademark resilience in the face of numerous headwinds and a challenging economy.
“As firms look to the year ahead, they’ll have a close eye on managing rising prices, and keeping a close eye on working capital will help firms as they try to mitigate the effects of inflation on their operations. We’ll be by their side to ensure they are in the best position possible in the months ahead and they look to capitalise on opportunities for growth.”
Business confidence in retail increased to 15% (up from 9%), perhaps reflecting a renewed confidence in trading prospects ahead of the festive season. However, business confidence in the manufacturing sector fell for the sixth month in a row, to 4%, down 9 points, the lowest confidence level since early 2021.
The construction sector held gains made in October, remaining unchanged at 20%, although this level still remains weaker than in the first half of the year.
Paul Gordon, Managing Director for SME and Mid Corporates, Lloyds Bank Business & Commercial Banking, said:
“The fall in confidence shows just how tough it is for businesses right now. Pressures from rising costs continue and businesses are starting to feel the burden of higher energy bills. However, the tentative easing of wage expectations should provide some solace although we know the labour market is still tight.
“We would encourage businesses to keep a keen eye on their costs and cash flow as we head into the festive period. If any businesses are struggling, we would encourage them to reach out for support. At Lloyds Bank we remain by the side of businesses to help navigate these challenging times.”
Hann-Ju Ho, Senior Economist Lloyds Bank Commercial Banking, said: “Given the recent political and economic landscape, it comes as little surprise that economic optimism and business confidence have fallen this month. Pay growth expectations remain high by historical standards, which could signal ongoing difficulties ahead for businesses to fill vacancies. Looking ahead, it will be interesting to see if the clearer policy picture provided by the Autumn Statement will lead to business confidence moving in a more positive direction as we go into 2023.”
