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Firms still positive

Business confidence slips as reopening delayed

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The hospitality sector is more optimistic (pic: Terry Murden)

Business confidence in the Scottish economy fell most across the UK regions during  July as the easing of restrictions was delayed by three weeks.

Despite the overall slip in confidence, some sectors such as hospitality and transport showed sharply higher levels of optimism as the economy reopened and the sun shone, according to the latest Business Barometer from Lloyds / Bank of Scotland Commercial Banking.  

There was a lower confidence in companies’ own business prospects month-on-month, down nine points at 33%.

A net balance of 13% of businesses in Scotland expect to increase staff levels over the next year, down five points on last month. 

The barometer questions 1,200 businesses monthly and provides early signals about UK economic trends both regionally and nationwide. 

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Businesses in the North East of England (40%), East Midlands (38%) and North West (38%) were the most optimistic overall. 

Scotland (down 14 points to 28%), East of England (down 11 points to 25%) and Wales (down nine points to 12%) reported the biggest falls in confidence but all retained an overall positive reading. 

The percentage of UK firms planning to create jobs in the next 12 months rose one point to 18% in July, the highest reading since November 2018 and the sixth consecutive month that employment expectations have risen. 

Fraser Sime, regional director for Scotland at Bank of Scotland Commercial Banking, said: “The decision by the Scottish Government to postpone the complete easing of lockdown restrictions until August may have a part to play in the subdued confidence among Scottish firms this month.  

“But while business optimism has taken a hit, the overall picture is still positive and we know many firms, particularly those in the hospitality and tourism industry are gearing up to re-open fully and take advantage of what will hopefully be a busy summer season.”

Confidence fell slightly in the broad economic sectors in line with the overall economic picture.

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Manufacturing and retail confidence declined for a second month from previously elevated levels. Nevertheless, at 33% (down from 35%) for manufacturing and 32% (down from 36%) for retail, confidence remains at historically strong levels. Construction and services sector confidence also dipped to 33% (from 35%) and 28% (from 31%), respectively.  

In the sub-sectors, confidence was particularly strong in hospitality (63%, up from 38%), and transport (53%, up from 37%), reflecting the further opening of the economy, as well as in business services & finance.

Employment and pay growth expectations were also especially strong in these subsectors as well as in construction. 

A survey on Scottish consumer confidence says it has returned to pre-pandemic levels in Q2 2021, rising by seven percentage points from the previous quarter./

The latest Deloitte Consumer Tracker says confidence is at its highest level since Q3 2019 and increased by a record eight percentage points year-on-year, albeit from a low base in Q2 2020.

Deloitte’s analysis is based on responses from more than 3,000 UK consumers, 313 of which were based in Scotland between 18 and 21 June 2021, as Scotland postponed its move to the lowest level of COVID-19 restrictions.

See also:

SCDI Data Briefing: Scotland resisting worst case economic warnings



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