Scottish businesses are showing new peaks of optimism as they believe economic conditions have improved over the past year and will continue to do so.

The latest Understanding Business survey, produced by Diffley Partnership and Charlotte Street Partners, shows rising numbers of businesses expect both their profitability and turnover to increase over the next 12 months. It suggested a slight Burnham Bounce in Scotland.

Perceptions that the UK and Scottish governments are concerned with business needs have reached their highest ever levels since the inception of Understanding Business in 2023.

However, this contrasts with an RBS survey last month which found a continuing lack of faith in government understanding of business needs.

Those who regularly accuse Scottish ministers of being out of touch with business needs, will be surprised that three in ten (30%) respondents to the Understanding Business survey say that the SNP best represents the interests of Scottish business, although the proportion selecting the party has fallen slightly by three percentage points since June.

Conversely, the proportion selecting the Scottish Labour Party has increased by four percentage points to just under a quarter (23%) of businesses. Around one in six (17%) businesses select the Scottish Conservatives, while around one in nine (11%) believe Reform UK best represents their interests. Just six percent of businesses select the Scottish Liberal Democrats or the Scottish Green Party.

Tthe proportion of respondents expecting an improvement in profitability has risen by eight percentage points since June to 46%, while the proportion forecasting an increase in turnover has risen by five percentage points to 45%.

Encouragingly for the new Prime Minister and Chancellor ahead of the Budget, the number of businesses believing economic conditions have worsened in the last year is down from 54% in June to 43%.

The survey is published as the International Monetary Fund released its latest report, predicting Britain’s economy will grow faster than expected this year (by 1.3%) before slowing in 2027 as higher energy prices and interest rates bite.

The IMF also warned governments to restrict borrowing and spending to relieve the cost of living. The report, along with soaring government borrowing costs, places extra pressure on Mr Healey.

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