Business confidence in Scotland continues to rise, as firms defy widely-reported concerns over the impact of rising costs.

Bank of Scotland’s business barometer showed confidence in March was 2% higher than in February, with retailers leading the charge.

It comes ahead of next month’s hikes in employers’ national insurance contributions, business rates and minimum wages.

It also follows a gloomier survey by 56 Degrees North and Diffley Partnership last week suggesting 68% of Scottish businesses expect their profitability to stall or decrease in the next financial year.

The North Sea Transition Taskforce today issues another call from the sector for the UK government to scrap the energy profit levy earlier than its 2030 deadline as companies abandon investment plans in the region.

Philip Rycroft, the chairman of the taskforce, said a loss of confidence in the future of oil and gas in the North Sea, “risks leading to a faster than necessary trajectory of decline, and meanwhile investments in renewables shifting to the right. If that gap is allowed to open further, there will effectively be no transition.”

According to the more optimistic Bank of Scotland data, Scotland recorded a higher level of confidence than the UK average which remained at 49%, the same as in February.

The West Midlands and London were the joint most-confident of any UK nation or region in March (both 62%), followed by the North West (59%).  

Scottish businesses reported higher confidence in their own business prospects month-on-month, up 15 points at 65%. When taken alongside their optimism in the economy, down 11 points to 44%, this gives a headline confidence reading of 55% (vs. 53% in February).

Looking ahead to the next six months, businesses in Scotland identified their top target areas for growth as investing in their team, for instance through training (46%), evolving their offering, for example by introducing new products or services (43%) and entering new markets (36%).

The Business Barometer, which surveys 1,200 businesses monthly and which has been running since 2002, provides early signals about UK economic trends both regionally and nationwide. This data was gathered between the 3 and 17 March, ahead of the Spring Statement. 

Sector insights

Retail confidence rose seven points to 58%, a post-pandemic high, reflecting positive trading prospects, again in defiance of rising costs and other surveys warning of job losses and store closures. Retail was a strong feature in last week’s uplift in GDP figures.

The manufacturing sector saw the largest decrease in business confidence this month, declining 12 points to 39%, due to increased concerns about supply chain disruptions. Construction firms also saw a decline to 48% and businesses in the service sector saw confidence decline to 47%. 

Martyn Kendrick, Scotland director at Bank of Scotland commercial banking, said: “It’s great to see business confidence in Scotland continuing to climb and remaining above the UK average, buoyed by stronger confidence from firms in their own trading prospects.    

“Scottish businesses are focused on further growth. Whether their strategies involve investing in their team or tapping into new markets, we’ll continue to support them in their ambitions.” 

Hann-Ju Ho, senior economist at Lloyds commercial banking, said confidence across the UK “remained steady”, suggesting that UK companies may have been waiting to see the impact of government decisions at home and globally.

“Despite this, today’s data continues to reflect a positive growth trend in the UK economy. With confidence maintaining last month’s high, business leaders are optimistic, noting that investing in their development and workforce will position them well to seize future growth opportunities.”