• Scottish business confidence rose by one point to 42% in April
• Firms’ optimism in their own trading prospects fell 14 points to 44%, while optimism in the economy climbed 17 points to 40%
• Overall UK confidence held steady at 42% in April – the same level as in March and February

Business confidence in Scotland rose one point during April to 42%, 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 14 points at 44%. When taken alongside their optimism in the economy, up 17 points to 40%, this gives a headline confidence reading of 42% (vs. 41% in March).

Scottish businesses identified their top target areas for growth in the next six months as investing in their team, including hiring new people and investing in training (36%), investing in sustainability (34%), and evolving their offering with new products or services (31%).

A net balance of 42% of businesses in the region also expect to increase staff levels over the next year, up one point on last month.

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 held steady at 42% in April, the same level as recorded in March and February.

While firms’ confidence in their own prospects dipped marginally by four points to 45%, their confidence in the economy rose by four points to 39%. Meanwhile, the net balance of companies planning to increase staff levels over the coming 12 months climbed six points to 33%.

The East of England was the most confident UK nation or region in April (56%), followed by the Wales (51%) and the North East (46%).

Sector insights

Businesses in the manufacturing sector reported increased confidence this month, recording an increased score of 45% (up 4 points) which is the highest level for 3 months. Similarly, confidence among firms in the services sector (42%) and construction (41%) also improved, largely driven by greater economic optimism.

In retail, confidence pulled back slightly from last month’s strong showing to 40%, illustrating that confidence in this sector remains fragile. Retail is also more liable to be impacted by external factors sectors other sectors do not face into, such as the poor weather.

Martyn Kendrick, regional director for Scotland at Bank of Scotland Commercial Banking, said: “Scottish businesses are still facing high costs, but such an encouraging rise in economic optimism suggests the pressure on their bottom lines is starting to ease as inflation comes down. 

“Looking ahead, events like Taylor Swift’s Eras tour, the Edinburgh Festival, and the 152nd Open golf championships are expected to drive a significant influx of tourists to Scotland over the summer so there’s lots for businesses to be excited about. From pubs and restaurants to local attractions, it’s expected to be a busy summer. However, if firms are going to make the most of this opportunity for growth, they need to have robust working capital and the appropriate resources in place.    

“As always, we’ll continue to be by the side of Scottish businesses and are ready to help firms make the most of the busy summer trading period ahead.”

Paul Gordon, managing director for SME and Mid Corporates at Lloyds Bank Commercial Banking, said: “It’s encouraging to see businesses are showing continued confidence in their own prospects and the wider economy. For the second consecutive month, confidence is unchanged which supports the growing sense that businesses are beginning to consistently feel more confident as we progress through the year.

“There are positive signs for the labour market with more businesses this month signalling they are open to hiring staff. However, the impact of minimum wage of companies’ hiring intentions will be closely watched, and we are yet to see this materialise among the largest firms. Businesses with smaller headcounts however, have been a bit more cautious, although they remain broadly positive. 

“Overall, businesses appear to be continuing the positive trend established at the start of the year, and we’re here to support them with their ambitions going forward”.

Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said: “We are beginning to see a consistent trend emerge from our Barometer results in recent months. Businesses are feeling increasingly confident about the economy, coinciding with falling inflation and hopes that interest rates will start to fall this year. 

“There continues to be a mixed picture among the regions, with the biggest rises seen in Wales and the South West. The strongest confidence was reported in the East of England, with confidence rising for the third consecutive month. Confidence in the North East eased slightly but remained strong in April. 

“The second quarter of 2024 has started brightly for businesses, and we are seeing firms expressing greater confidence in an enduring economic recovery.”