Scottish business confidence enters positive territory for first time since pandemic began

Business confidence in Scotland rose 11 points during April to 9%, the first positive reading since February 2020, according to the latest Business Barometer from Bank of Scotland Commercial Banking.

Scottish business confidence enters positive territory for first time since pandemic began

Companies in Scotland reported higher confidence in their own business prospects month-on-month, up 10 points at 5%. When taken alongside their optimism in the economy, up 11 points to 13%, this gives a headline confidence reading of 9%.

The Business Barometer questions 1,200 businesses monthly and provides early signals about UK economic trends both regionally and nationwide.

When it comes to jobs, a net balance of 9% of firms expect to reduce staff levels in the next year, down from 20% last month.

Overall UK business confidence surged 14 points in April to 29%, the highest reading since September 2018. The result follows the reopening of outdoor hospitality venues and non-essential retail and personal services providers in England and comes ahead of further restrictions easing in Wales and Scotland. Firms’ confidence in their own business prospects rose by 14 points to 26% and their optimism in the economy increased by 15 points to 32%.

Most UK regions and nations reported a month-on-month increase in confidence during April, with firms in the South West (up 22 points to 30%), London (up 20 points to 32%), the East Midlands (up 20 points to 40%) and Yorkshire and the Humber (up 20 points to 32%) reporting the largest surges. No nation or region reported a fall in confidence, and nowhere had a net-negative confidence reading for the first time since July 2019.

Fraser Sime, regional director for Scotland at Bank of Scotland Commercial Banking, said: “With hospitality and retail reopening this month, firms are feeling more optimistic as they begin to welcome people back to shop, eat and enjoy what Scotland has to offer.

“While some businesses are still planning to reduce staffing levels this year, it’s encouraging to see the number of companies planning job cuts has decreased month-on-month, a trend we hope to see continue. As lockdown restrictions ease over the coming weeks, we will continue to stand by Scottish businesses as they look to their recovery.”

Confidence increased in all sectors, with manufacturing and retail confidence levels at three-year highs. Manufacturing stood out as the most positive sector (40%), likely reflecting strong global demand and notwithstanding ongoing supply chain issues. Retail confidence jumped to 39%, while construction confidence also increased to 28%. Services confidence rose to 25%, which was also the highest it has been since 2018.

Paul Gordon, managing director for SME and Mid Corporates, Lloyds Bank Commercial Banking, added: “It’s very encouraging to report a continued improvement in sentiment for the UK’s regions and nations, particularly the Northern English regions that are leading the upward trend. In the sectors, the story is broadly positive – especially manufacturing and retail, which stood out and reported confidence levels at three-year highs. The retail sector, specifically, experienced some much-needed relief this month with the easing of lockdown restrictions. We hope that pent-up consumer demand will drive growth as the economy reopens further.”

Hann-Ju Ho, senior economist, Lloyds Bank Commercial Banking, commented: “A third consecutive monthly rise in business confidence alongside the highest level of confidence for two-and-a-half years] tells us a positive story about the UK’s continued economic recovery and leaves us optimistic about the road ahead.

“While uncertainties remain regarding the evolution of the pandemic, this month’s improvement in sentiment reflects a further easing of COVID-19 restrictions, while progress in vaccine deployment is raising hopes that the negative impact of the health crisis will continue to fall in the months ahead as the economy reopens.”

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