Scottish businesses begin 2024 with rise in confidence

The barometer surveyed 1,200 companies – including 106 in Scotland – between 3 and 17 January.

Overall, UK business confidence rose nine points in January to 44% – its highest level since February 2022 and its strongest start to a year since 2016. Firms’ outlook on the overall UK economy rose ten points from 27% to 37%, while businesses’ optimism in their own trading prospects also climbed three points month-on-month to 51%.

Companies’ hiring intentions increased marginally, with 33% of firms intending to increase staff levels over the next 12 months, up four points on the month before.

Three of the four sectors tracked in the barometer reported rises in confidence.

The most significant increase was in services which accelerated 15 points to 45%, up from December’s 16 point drop.

Manufacturing confidence also increased to 49%, while construction rose eight points to a 10-month high of 45%.

There was a more mixed picture in retail however, dipping three points to 41%, with anecdotal evidence of weaker footfall and sales in December as shoppers hit the streets earlier than usual in November. Nevertheless, some companies still reported stronger sales over the festive period.

Martyn Kendrick, regional director at Bank of Scotland Commercial Banking, said: “After a dip in confidence at the end of 2023, it’s exciting to see Scottish businesses start the year with such a positive outlook.

“While Scottish businesses have faced a lot of challenges over the past few years and continue to contend with a difficult geopolitical and economic landscape, we are still seeing a strong appetite for growth.

“To maximise these growth opportunities, companies need to prepare to adapt and adjust to external factors – for many, this could mean evolving their offering, diversifying into new markets, or investing in new ways of working.”

Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, added: “The reduction in inflation, albeit with the recent uptick, and the belief that interest rates may have peaked, is likely driving the rise in confidence among firms.

“With ongoing geopolitical issues and a general election on the horizon, businesses will have factored these into their risk radars and will be working to prepare for any potential impacts on their trading prospects.

“Also, half of all companies say they’re planning to increase headcount in the coming year,“ he noted. “Despite that and the changes to minimum wage that will come into force in April, expectations for staff pay fell back following last month’s increase”.

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