Economic boost

Business confidence at highest for eight years

chart and business finance
Optimism among businesses is rising

Business confidence in Scotland was the joint highest of any UK nation or region in May, providing more evidence that the economy has turned the corner.

According to the Bank of Scotland Business Barometer companies in Scotland reported higher confidence in their own prospects month-on-month, up 16 points at 60%.

UK confidence rose eight points – to 50% – a level last surpassed in November 2015.

When taken alongside Scottish firms’ optimism in the economy, up 13 points to 53%, this gives a headline confidence reading for Scotland of 57% (vs. 42% in April).

This is the joint highest overall confidence alongside the South East of England (also 57%).

A net balance of 50% of businesses in Scotland also expect to increase staff levels over the next year, up eight points on last month.

Looking ahead to the next six months, Scottish businesses identified their top target areas for growth as investing in their team, for example by investing in training (44%), evolving their offering (40%), and introducing new technology (36%).

The research provides further evidence that the economy has turned a corner and may help the Tories close the gap on Labour.

Bank of Scotland parent group Lloyds said businesses were feeling better about their trading prospects and the economy..

Hann-Ju Ho, senior economist at Lloyds commercial banking, said: ‘These results highlight a notable improvement. 

Across the sectors, there were strong, broad-based improvements in services and construction.’

It comes as the Office for National Statistics said cost increases for UK households slowed in the last quarter. 

Household costs rose 4.4- per cent, a slower rate compared to the annual rate of 5.3 per cent in January 2024.

Further positive news came from Scottish Engineering which said overall order intake amongst members increased again in the second quarter by a net 9% with UK orders amongst medium and large companies the strongest driver.

Paul Sheerin
Paul Sheerin: orders growing

For the coming three months, members forecast a net increase of 27% of businesses having increased orders, with output forecast for a net 20% increase in the same period.

Optimism continues its positive trend from last quarter – overall 19% positive, with all sectors above the line up to 42% positive for medium sized companies. A particular welcome return to positive optimism for our fabricators, the first time above the line in the last year.

However, retailers continue struggle for customers with Scottish footfall down by 5.4% in May (YoY), from -3.6% in April.

This is worse than the UK average decrease of 3.6% (YoY). Footfall in Edinburgh decreased by 4.6% (YoY), while Glasgow fell by 4.8% (YoY).

David Lonsdale, director of the Scottish Retail Consortium, said: “Shopper footfall in May was a damp squib with visits to Scottish stores dwindling compared to the year before.

“Whilst failing to match the heights of last May, when an extra bank holiday and the King’s Coronation provided a lift, was not a surprise this was still an underwhelming performance. Indeed, May’s performance was the weakest since October and the eighth month in a row of sub-par foot-traffic.”

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