Confidence highest among companies based in Scotland

● Report suggests Scots firms positive about outlook despite economic threats

Confidence among Scottish businesses has jumped, putting the rest of the UK in the shade, a report out today would suggest.

However, the latest Business in Britain report from Lloyds Banking Group and Bank of Scotland also highlights a number of threats for the first half of 2017, including economic uncertainty and weakening UK demand.

The report’s Scottish confidence index – an average of respondents’ expected sales, orders and profits over the next six months – rose to 21 per cent, up from just 6 per cent in September. The surge puts the nation ahead of England and Wales where firms’ confidence has decreased by two points since the previous survey to 14 per cent.

The most commonly identified threat cited by Scottish firms in the next six months was economic uncertainty – 24 per cent of those polled – followed by weaker UK demand (12 per cent) as businesses wait for further details of Brexit.

Companies north of the Border also cited political uncertainty (11 per cent), regulation (8 per cent) and weaker overseas demand (7 per cent) among the biggest threats to their business.

Nick Laird, regional managing director for mid-markets, Bank of Scotland, said: “Business confidence in Scotland has increased markedly since September, a sign that we are entering 2017 with optimism.

“While this year may present more challenges, which will include gaining a greater understanding of what impact leaving the EU may have, Scotland’s business owners are resilient and continuing to do what they do best – getting on with growing their businesses.”

Overall, the net balance of firms anticipating stronger export sales in the coming six months leapt to 55 per cent from zero per cent in September. The upturn was led by a big increase in the number of firms anticipating stronger exports to Asia Pacific, North America and Latin America.

The weaker pound also contributed to a rise in firms’ pricing intentions. The net balance of those expecting to hike their prices in the coming six months lifted to 22 per cent from 13 per cent previously.

Meanwhile, Scottish companies are expecting to bolster their headcounts, with a net balance of 11 per cent planning to take on extra staff in the months ahead, up from -21 per cent in September.

The share of firms saying they are experiencing difficulties in recruiting skilled labour increased to 34 per cent from 26 per cent.

Hann-ju Ho, senior economist at Lloyds commercial banking arm, said: “The weaker pound has given a huge boost to exporters as they look beyond their traditional export markets of the US and Europe.

“However this has also led to a jump in the number of firms intending to raise the price of their goods and services in response to higher costs. As a result, we would expect inflationary pressures to rise.”