29 Feb 2024
Scottish businesses recorded the strongest business confidence of any UK nation or region in February, according to the latest Business Barometer from Bank of Scotland Commercial Banking.
Companies in Scotland reported stronger confidence in both their own business prospects (up 11 points to 68%) and the wider economy (up 19 points to 46%) month-on-month. Taken together, this gives a headline confidence reading of 56% (vs. 42% in January) – the highest level recorded in the UK in February.
Looking ahead to the next six months, Scottish businesses identified their top target areas for growth as evolving their offering, including new products or services (49%), investing in their team (32%), and introducing new technology (22%).
A net balance of 26% of businesses in the country expected to increase staff levels over the next year, down 16 points on last month.
The Business Barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.
National picture
Overall, UK business confidence dipped two points in February to 42%, driven by softening confidence from firms in both their own trading prospects (49% vs. 51% in January) and the wider economy (34% vs. 37% in January).
However, companies’ hiring intentions increased to the highest level since May 2022, with 36% of firms intending to increase staff levels over the next 12 months, up three points on the month before.
The North East followed Scotland as the UK’s second-most confident region or nation in February (54% vs. 62%), with the East Midlands closely behind (52% vs. 38%).
Sector insights
There was a mixed picture for sectors this month. Confidence fell in manufacturing (nine points to 40%) and construction (seven points to 38%) respectively, although results remain higher than the same time last year. In contrast, the dominant services sector was unchanged compared to January at 45%, exceeding all months of 2023 except for November. Retail confidence was broadly steady, dipping one point to 41%.
Martyn Kendrick, regional director for Scotland at Bank of Scotland Commercial Banking, said: “Such high levels of confidence in the face of what are still challenging economic conditions is a testament to the Scottish business community’s resilience and ambition.
“The focus on innovation, together with widespread investment in people, is particularly encouraging. This will not only help futureproof firms’ specific offerings, but also strengthen the skills base that is the bedrock to our economy – helping firms make the most of new opportunities and weather any future downturns in trading.
“We’ll continue to be by business’ side as they look to capitalise on this confidence over the months ahead.”
Paul Gordon, managing director for SME and Mid Corporates at Lloyds Bank Commercial Banking, said: “For the second consecutive month we’ve seen businesses display a level of confidence that sets a positive outlook for the year ahead – the 42% reported this month aligns with the highest level we saw in 2023.
“It’s also very encouraging to see that businesses are keen to hire more staff – great news for the UK overall. With more businesses open to hiring, more people can get into work, providing a boost to the UK economy.
“This level of confidence is encouraging and suggests businesses are open to investing in their future, and we have a team of experts on hand to offer support and guidance so we can help them, and Britain, prosper.”
Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said: “This month’s data still reflects a positive mood among businesses despite a marginal fall in overall confidence. Firms appear to be upbeat about their prospects and the economy, supporting their positive staffing expectations.
“Looking at the sectors, there is a mixed picture. There was a slight fall in confidence reported in the manufacturing and construction sectors, while retail and services stood their ground – remaining unchanged compared to January’s figures. But despite the manufacturing and construction fall, businesses are still showing high levels of confidence.
“The split across the regions also provides reason to view the dip in confidence at the broader UK level cautiously. Six regions have reported an increase in confidence while the other six have reported a decrease. So, scratching the surface, we see a story that continues to show a more positive outlook for the year ahead.”
