Scottish business confidence hits highest level for almost seven years

Business confidence in Scotland has hit its highest level for almost seven years amid a successful vaccine rollout and hopes of a further lifting of lockdown restrictions.

Thursday, 20th May 2021, 7:16 am

A new survey from chartered accountancy body ICAEW, published today, found optimism had improved markedly at 29.4 on the quarterly index – marking its highest point since 2014.

The organisation’s latest business confidence monitor put the sharp rise in confidence down chiefly to the vaccine rollout and expectations of a strong rebound in economic growth as lockdown restrictions ease.

The boost in confidence follows a tough 12 months for Scottish businesses, which experienced a fall in domestic sales and little export growth in the year to the start of the second quarter of 2021.

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The latest business confidence monitor put the sharp rise in confidence down chiefly to the vaccine rollout and expectations of a strong rebound in economic growth as lockdown restrictions ease. Picture: Lisa Ferguson

David Bond, ICAEW regional director for Scotland, said: “It’s positive news for Scotland’s economic recovery that business confidence has hit its highest point since 2014 as companies look to the future following the success of the UK’s vaccine rollout.

“The past year has been very challenging for Scottish companies, but with expected increases in domestic sales, exports and profits over the next 12 months, the prospects are promising.

“However, even as the economy unlocks companies will be mindful of global health and economic problems which could still see muted recovery for UK businesses, so it’s vital that the new Scottish Government works closely with businesses to plan a path to a sustainable economic recovery and vibrant future.”

The business monitor found that domestic sales were expected to grow at their fastest rate since the survey began in 2004, while the rate of export growth was anticipated to outpace the rest of the UK over the coming year.

As revenues recover, Scottish businesses expect to begin hiring again after reducing their headcounts by a collective 0.7 per cent last year, with the furlough scheme likely to have protected jobs.

Profits were predicted to grow in line with sales, which could in turn push companies to increase their investment spending, the ICAEW noted.

Against a backdrop of “considerable uncertainty” from the pandemic, businesses cited regulatory requirements as the main growing challenge, likely reflecting both Brexit difficulties and Covid-related restrictions.

Meanwhile, 27 per cent of Scottish businesses reported that transport problems were an increasing challenge, again most likely as a result of the impact of the pandemic.

On Monday, it emerged that Scotland’s private sector economy saw the fastest rate of growth for eight months in April as the recovery continued.

Firms reported a strong rise in new business as customers responded to a loosening of lockdown restrictions, according to the latest Royal Bank of Scotland PMI figures. Businesses also began taking on additional staff for the first time since January 2020.

The business activity index – a measure of combined manufacturing and service sector output – rose from 54.3 in March to 55.4 in April to signal a back-to-back upturn. The increased demand saw backlogs of work rose for the first time in over two-and-a-half years.

However, the rate of growth in Scotland lagged behind the UK average in April.

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