Scottish business confidence hits record high ‘but challenges remain’
Business confidence in Scotland has climbed to its highest-ever level but “some challenges still remain”, a regular study today reveals.
The latest quarterly Business Confidence Monitor, from chartered accountancy body ICAEW, found that, with an index reading of +42.2, confidence is at the highest level since the survey began in 2004.
The report noted that the high sentiment likely reflected a recovery in sales over the past year since the easing of most Covid restrictions, and expected further increases in revenues in the coming months.
Businesses in Scotland saw their domestic sales rise by 2.8 per cent year-on-year in the latest quarter, while exports lifted 1.3 per cent.
Further growth is expected and domestic sales are forecast to rise by 5.6 per cent in 2022. Export growth is also projected to pick up, at 4.4 per cent - a stronger outlook than the UK average.
Businesses said that they planned to increase staff levels at the highest rate seen in three years. Average salaries are also forecast to increase, following “very limited growth” during the pandemic, as labour market conditions tighten.
Four in ten companies reported staff turnover as an increasingly pressing issue. The proportion of organisations that reported problems hiring people for non-management roles as a growing issue also surged from 4 per cent in the final quarter of 2020 to 37 per cent in the latest snapshot, the highest rate seen in Scotland since the business monitor began.
Scottish businesses are also facing increases in input prices at a faster rate than the UK average. ICAEW said this has been caused by rising demand domestically and internationally, higher energy and commodity prices, and disruptions to supply chains.
The monitor predicted that Scottish businesses would see the joint fastest rise in input prices in the UK, at 3.5 per cent in the year ahead. This would be the fastest increase in more than a decade.
David Bond, ICAEW regional director for Scotland, said: “It’s excellent news that businesses are feeling so confident, as it indicates that an economic recovery is firmly underway in Scotland, and businesses tell us they are seeing increased sales now that most coronavirus restrictions have been removed.
“However, it’s clear that some challenges still remain, and businesses will hope these reduce as we enter the new year, so that the recovery can continue into 2022,” he added.
The report noted that as a result of cost increases, businesses hiked the prices they charge customers by 1.6 per cent over the last year, with a further rise of 3 per cent expected for the year ahead.
Transport problems were an increasing hindrance for 44 per cent of businesses quizzed, nearly ten percentage points above the previous record rate of Scottish companies citing this. A fifth of Scottish companies also stated that the tax burden had become a growing issue. This was likely to reflect concerns around government plans for higher corporation tax rates and the cost of increased National Insurance contributions.