Business confidence plunges in Scotland as war and inflation pressures mount
Fraser Sime, regional director at the Bank of Scotland, said the ‘current economic climate is understandably proving challenging for Scottish firms.
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Your support makes all the difference.Business confidence in Scotland plunged in March as the Ukraine war and soaring energy prices helped to “create a myriad of headwinds” for the nation’s firms.
Confidence north of the border fell 18 points during March to 17%, according to the latest business barometer from the Bank of Scotland Commercial Banking.
Fraser Sime, regional director at the bank, said the “current economic climate is understandably proving challenging for Scottish firms, with rising energy prices, inflation, and the ongoing war in Ukraine combining to create a myriad of headwinds”.
The survey of 1,200 businesses found firms in Scotland reported lower confidence in their own business prospects month-on-month, down 24 points at 18%.
When taken alongside their optimism in the economy, down 12 points to 16%, this gives the headline confidence reading of 17%.
And in a further blow, the business barometer found just 9% of businesses expecting to increase staff levels over the next year, down 22 points on last month.
Paul Gordon, of Lloyds Commercial Banking, said: “Businesses that were beginning to see green shoots are now having to reconsider their approach and adapt to a new set of challenges.”
Bank analysts said the Russian invasion of Ukraine had the greatest impact on manufacturing and retail firms, with both sectors seeing drops in confidence from February’s highs.
In manufacturing, business confidence levels are now at their lowest since last summer, while retail has fallen to a one-year low.
Confidence at service firms dropped by six points to 32% while in construction it dropped eight points to 43%, but remained higher than at the start of the year.
Despite the dip in confidence the Bank of Scotland said firms had identified a range of growth opportunities within the next six months, including investing in their teams, entering into new markets, or evolving their offering.
Across the United Kingdom business confidence dropped by 11 points during March, the Bank of Scotland said, from 44% to 33%, and every part of the country but Wales reported positive confidence readings.
Hann-Ju Ho, senior economist Lloyds Bank Commercial Banking, said: “Following encouraging improvements at the start of the year, March’s fall in confidence is therefore disappointing, but not surprising.
“There are positives with the fact that confidence remains above the long-term average and it appears for now that growth will moderate. But it is difficult to gauge what the full impact will be and therefore businesses have become more cautious.”