(Credit: George Iordanov-Nalbantov)

While Scottish firms’ optimism in the economy fell five points to 43%, their confidence in their own business prospects rose 23 points month-on-month to 70%. Taken together, this gives a headline confidence reading of 56% (vs. 47% in June).

Looking ahead to the next six months, Scottish businesses identified their top target areas for growth as introducing new technology, such as AI and automation (48%), entering new markets (41%) and investing in their team, for example through training (41%).

The Business Barometer, which surveys 1,200 businesses monthly and which has been running since 2002, provides early signals about UK economic trends both regionally and nationwide.

National picture

Overall, UK business confidence increased one point in July to 52% – its highest level since 2015 and the third consecutive monthly increase.

Firms’ optimism in their own trading prospects rose one point to 58%, while their confidence in the wider economy increased two points to 47%

Wales was the most confident UK nation or region for the second month in a row (76%), followed by the North East (73%).

Sector Insights

July saw the service sector’s confidence increase by 11 points to 61%, one of the main drivers behind this month’s overall increase in business confidence, indicating strong momentum in the sector. This gain was partially offset by declines in other areas, with retail firms down eight points, manufacturers down four points and the construction sector down six points.

Martyn Kendrick, Scotland director at Bank of Scotland Commercial Banking, said: “It’s very encouraging to see Scottish business confidence not only rising in July, but once again outpacing the UK average.

“Technology is set to play a particularly important part in Scottish firms’ plans, with more businesses identifying it as a key avenue for growth than anywhere else in the UK. We’ll continue to support businesses’ investments in this space, and beyond, as they press ahead with their ambitions.”

Hann-Ju Ho, senior economist, Lloyds Commercial Banking, said: “This continued upward trend reflects a growing sense of cautious optimism across the UK economy, underpinned by both improved trading prospects and broader economic sentiment.

“Despite ongoing cost pressures, firms are positioning for growth, particularly in services where hiring and investment plans are accelerating.

“Overall business confidence remains buoyant, with firms well placed to take advantage of opportunities such as new markets, adopting new technology and workforce expansion amid evolving market conditions.”

Paul Kempster, managing director for commercial banking coverage, Lloyds Business & Commercial, said: “July’s figures show that businesses are looking to the future. While confidence isn’t rising evenly across all sectors and regions, it’s encouraging to see positive sentiment holding well above the long-term average.

“As confidence builds, we remain committed to supporting firms with a range of financial services to help them achieve their growth ambitions.”