27 Mar 2024
Business confidence in Scotland fell 15 points during March to 41%, according to the latest Business Barometer from Bank of Scotland Commercial Banking.
Companies in Scotland reported lower confidence in their own business prospects month-on-month, down 10 points at 58%. When taken alongside their optimism in the economy, which fell 23 points to 23%, it gives a headline confidence reading of 41% (vs. 56% in February).
However, a net balance of 41% of businesses in the country expect to increase staff levels over the next year, up 15 points on last month.
Looking ahead to the next six months, Scottish businesses identified their top target areas for growth as evolving their offering, for example by introducing new products or services (42%), investing in their team, for example by hiring new staff or investing in training (37%) and introducing new technology, such as AI or automation (34%).
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 registered 42% in March, the same as in February, as firms’ confidence in their own trading prospects (49%) held steady, and confidence in the economy strengthened by one point (35%).
Yorkshire and the Humber was the most confident UK nation or region in March (60%), followed by the North East (56%) and London (52%).
Sector Insights
Services confidence fell 5 points to 40%, the first decline since December. That drop, however, was offset by rises in confidence in the manufacturing, retail and construction sectors.
The gains in manufacturing (up 1 point to 41%) and construction (up 2 points to 40%) were relatively modest and confidence remained below levels seen at the start of 2024. Firms in the retail sector reported improved confidence (up 5 points to 45%), which was the strongest result for over two years.
Martyn Kendrick, regional director for Scotland at Bank of Scotland Commercial Banking, said:
“Many businesses still face unpredictable market conditions and acute cost pressures, making long-term financial planning more daunting. Inevitably that has a knock-on effect on confidence.
“However, the fact that so many Scottish firms are still optimistic about their trading prospects over the coming year highlights the resilience and ambition prevalent within our business community.
“The emphasis on growing headcount and investing in workforce development is particularly encouraging. Combined, that will not only strengthen firms' own offerings, but benefit communities across Scotland. Whatever their growth plans, we’ll continue to be by the side of Scottish business.”
Paul Gordon, managing director for relationship management, Lloyds Bank Business & Commercial
“Businesses have shown remarkable confidence in the first three months of 2024. For the third consecutive month our Business Barometer has shown that confidence among firms remains positive and that they are feeling confident about their prospects in 2024.
“It’s similarly pleasing to see a strong set of results across the sectors – particularly in retail which has faced significant challenges over the last couple of years.
“The results so far this year suggest that businesses are ready to invest in themselves and feeling optimistic about the economy, and we’re here to support them in any way they need.”
Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said:
“With businesses reporting 42% confidence in March, this month’s figures maintain the recent improvement bringing a positive end to the first quarter of the year. Firms are showing increasing resilience which is reflected in their easing concern about supply chain disruption and energy prices.
“Businesses also continue to signal optimistic hiring intentions, although slightly down on previous months. It’s possible the impending minimum wage rises in April are beginning to come into sharper focus for businesses – especially smaller firms.
“Among the regions there was a mixed picture. Following unusually low confidence in February, London bounced back with a 14-point increase to bring the capital back in line with typical figures reported for the area, although the greatest confidence was shown by businesses in Yorkshire & the Humber who reported a 29-point rise, making it the most confident region overall. However, businesses in the Midlands saw a significant fall which seems to be an outlier compared to recent results.
“Overall, the Barometer across the quarter suggests that we could begin to see more optimistic economic growth in 2024 than seen in recent years, although medium-term challenges remain.”
