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• Business confidence in Scotland rose 13 points to 44% in December
• While firms’ optimism in their own trading prospects fell four points to 39%, their optimism in the economy rose 31 points to 49%
• Overall UK business confidence dipped three points in November to 41%

Business confidence in Scotland rose 13 points during December to 44%, according to the latest Business Barometer from Bank of Scotland.

While companies in Scotland reported lower confidence in their own business prospects month-on-month, down four points at 39%, their optimism in the economy rose 31 points to 49%. Taken together, this gives a headline confidence reading of 44% (vs. 31% in November).

A net balance of 44% of businesses in the country also expect to increase staff levels over the next year, up 21 points on last month.

Looking ahead to the next six months, Scottish businesses identified their top target areas for growth as introducing new technology (52%), entering new markets (42%) and investing in their team, for example through training (38%).

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.

National picture

Overall UK business confidence fell two points in December to 39%, although remained above the long-term average of 29%.

While firms’ confidence in the wider economy strengthened five points to 31%, their confidence in their own trading prospects fell eight points to 47%.

London was the most confident UK nation or region in November (53%) for a second month in a row, followed by the North West (50%).

Sector insights

Although confidence fell in the service sector, this was partly offset by rises in manufacturing and retail, with these sectors swapping places in December.

Services fell from 46% to 35% in December – a fall of 11 points. In contrast, manufacturing and retail increased 10 points to 42% and 43% respectively, thereby taking manufacturing and retail above services for the first time in 4 months. Trading prospects for retail rose for the first time in three months, while construction confidence was steady at 41%, equalling last month’s result.

Martyn Kendrick, Scotland director at Bank of Scotland Commercial Banking, said: “It’s encouraging to see Scottish business confidence end the year on the rise, and above the UK average. And it’s particularly good to see such widespread hiring intentions – a move that benefits local communities and Scotland’s economy, as well as businesses themselves.

“Businesses will be focused on putting their plans for fresh growth into action. We’ll continue to be by their side to support their ambitions.”

Hann-Ju Ho, Senior Economist, Lloyds Commercial Banking, said: “In the last few months overall confidence has fallen incrementally, and in December the trend continued as it fell by 2 points to 39%. While there hasn’t been any significant one-month change, confidence has gradually drifted from the summer’s highs”.

“The key difference in this month’s results is that the fall in confidence is driven by firms’ own trading prospects which have proven to be resilient over the last quarter. There was, however, more positivity regarding the wider economy and, going into 2025, this offers some hope if companies continue to feel confident about the economy.

“Elsewhere, although confidence fell in the services sector, this was partly offset by improvements in manufacturing and retail – which could be a significant for this time of year.”

Paul Kempster, Managing Director for Relationship Management, Lloyds Bank Business & Commercial, said: “The mixed results in trading prospects and economic optimism suggest that while businesses feel they are facing some challenges, there is still some opportunity in regard to the wider economy. Although overall confidence dipped this month, we’re still optimistic that firms’ trading prospects will return to the levels seen earlier this year.

“The regional picture is also mixed with significant increases in confidence in Scotland and Northern Ireland, but more acute falls in confidence in the North-East. As we enter the New Year, and businesses across the country consider their plans for 2025, we are committed to helping them to navigate their journey and prosper.”