Bank of Scotland: Business confidence down after ‘challenging’ October
Business confidence in Scotland fell eight points during October to 31%, according to the latest Business Barometer from Bank of Scotland Commercial Banking.
Companies in Scotland reported lower confidence in their own business prospects month-on-month, down one point at 38%. When taken alongside their optimism in the economy, down 16 points to 22%, this gives a headline confidence reading of 31%.
The Business Barometer questions 1,200 businesses monthly and provides early signals about UK economic trends both regionally and nationwide.
A net balance of 30% of businesses in Scotland expect to increase staff levels over the next year, down three points on last month.
Overall UK business confidence remained steady month-on-month dipping by just three points to 43% and remaining comfortably above the year-to-date average of 26%. Hiring intentions were unchanged on September’s reading at 37%, while firms’ optimism in the economy (down four points to 44%) and confidence in their business prospects (down one point to 42%) were down marginally.
All UK nations and regions reported positive confidence readings for the seventh consecutive month. Firms in London (up three points to 65%), the North East (unchanged at 61%) and the East Midlands (up eight points to 55%) had the highest confidence readings, while businesses in the South East (down 11 points to 21%) and Wales (down 23 points to 23%) had the lowest overall confidence levels.
Fraser Sime, regional director for Scotland at Bank of Scotland Commercial Banking, said: “October has been a challenging month for businesses across Scotland with fuel and staff shortages combined with continued shipping disruption presenting significant headwinds.
“Despite this, overall levels of business confidence remain solid at 31% as firms display the resilience needed to keep operations running. While challenges persist, we’ll remain by the side of Scottish businesses to support and hopefully bolster the positive momentum we’ve seen throughout the year.”
From a sector perspective confidence remained strongest in manufacturing, rising to a five-month high of 51% (up two points from 49%) with trading prospects being particularly positive (60% expecting stronger activity in the year ahead). Additionally, 68% of manufacturing firms are planning on bringing all furloughed staff back which is more than any other sector. However, these firms are also less likely to say it is easier to find people with the right skills and experience.
Business confidence in retail and services fell slightly to 37% (down five points from 42%) and 43% (down four points from 47%) respectively, although they remain higher than three months ago. 59% of firms in both retail and services expect all their furloughed staff to return, less than in manufacturing. Additionally, higher proportions of firms said that it is becoming easier to hire people with appropriate skills and experience proportions (46% in retail and 53% in services, compared with 41% in manufacturing).
Paul Gordon, managing director for SME and mid corporates at Lloyds Bank Commercial Banking, said: “There has been some fluctuation in confidence recently due in part to the supply-chain pressures facing firms. However, it is promising to see the majority of regions and nations have seen an uptick in confidence over the last three months.
“Manufacturing confidence continues to rise through positive trading and employment prospects, and we hope that this cadence follows into other sectors.”
Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, said: “While economic optimism saw a slight dent in October due to rising costs and the on-going supply chain issues, it is clear that firms are still feeling relatively buoyant as overall business confidence remains high and above the long-term average.
“With sixty percent of firms saying that they expect to bring all their furloughed staff back to work, and a further thirty percent intending to bring back more than half, it should bode well for the labour market as we head into the winter.”