• Business confidence in Scotland rose by 15 points to 57% in May – the joint highest level of any UK nation or region
• Firms’ optimism in their own trading prospects rose by 16 points to 60%, while optimism in the economy climbed 13 points to 53%
• Overall UK confidence rose eight points to 50% – the highest level in eight years

Business confidence in Scotland was the joint highest of any UK nation or region in May, according to the latest Business Barometer from Bank of Scotland Commercial Banking.

Companies in Scotland reported higher confidence in their own business prospects month-on-month, up 16 points at 60%. When taken alongside their optimism in the economy, up 13 points to 53%, this gives a headline confidence reading of 57% (vs. 42% in April) – the joint highest overall confidence reading on the Business Barometer in May, 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 Business Barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide. The data for this edition was collected between 1–16th May, before the UK general election was announced.

National picture

In May, overall UK business confidence reached its highest level since 2015 – rising by eight points to a net balance of 50%.

Businesses showed increased optimism in both their trading prospects (up nine points month-on-month to 54%) and the economy (up seven points to 46%). Firms’ trading outlook was the most optimistic in seven years, while economic optimism was the highest recorded since September 2021.

The West Midlands (56%) followed Scotland and the South East of England as the second-most confident UK nation or region in May.

Sector insights

Similarly, there were particularly strong results reported in the construction and services sectors this month. Prospects in the construction sector jumped to 58% (up 20 points), the highest for 14 months, while in services, expected output increased to 57% (up 12 points). On the latter, it is the highest level since the survey was expanded in 2018. Expected business activity in the retail sector also improved to 49% (up three points).

Although trading prospects in manufacturing eased slightly to 49% (down three points), the underlying trend over the last three months remains positive.

Martyn Kendrick, regional director for Scotland at Bank of Scotland Commercial Banking, said: “Along with longer nights and warmer days, summer is ushering in a new wave of confidence among Scottish businesses.

“As firms look ahead to new growth, it’s essential that they have the right strategy and resources in place to capitalise on new opportunities. This will help them make the most of whatever lies ahead, and support their long-term resilience. We’ll continue to be their side with our backing to help translate their ambition into results.”

Paul Gordon, managing director for SME and Mid Corporates at Lloyds Bank Commercial Banking, said: “The last three months saw confidence unchanged at 42% as businesses adjusted to the economic environment. That consistency has been followed up by a marked increase in confidence in May with improved scores for trading prospects, economic outlook and hiring intentions.

“Following on from last month, there also continue to be positive signs for the labour market as businesses show increased hiring intentions.

“We remain committed to supporting our clients, providing the resources, expertise and solutions necessary to help businesses thrive in this evolving landscape.”

Hann-Ju Ho, Senior Economist, Lloyds Bank Commercial Banking, said: “These results highlight a notable improvement in business confidence. Optimism about the economy increased to 46% this month – the highest result since September 2021, when the country was emerging from the Covid-19 pandemic, but before the energy crisis after the invasion of Ukraine.

“The regional picture has also improved – we’ve now seen increases in seven of the UK’s 12 regions, where there was previously a more mixed picture. Results in the South East, Scotland and the West Midlands were particularly strong. Across the sectors, there were strong, broad-based improvements in services and construction.”