Business Confidence Goes Negative

16 June 2015, 09:15 | Updated: 16 June 2015, 09:18

Business confidence in Scotland has fallen into negative territory for the first time in three years - well below the UK average, according to a report.

The latest business confidence monitor shows Scottish firms have recorded a confidence score of -7.4, down from 3.6 for the previous quarter.

It places Scotland's score far below the UK average of 16.6 for the last three months, making it the least confident part of the UK and the only area to record a negative confidence score this quarter.

The analysis was carried out by the Institute of Chartered Accountants in England and Wales (ICAEW) and Grant Thornton UK.

Kevin Engel, Grant Thornton's managing partner in Scotland, said: "This significant drop in confidence north of the border is naturally concerning, particularly given Scotland is the only part of the UK showing such a marked negative trend. The quarter examined covers the pre-election period, which could go some way to explain the downward shift in confidence.''

The report found that Scottish businesses have experienced a slowdown across a range of key financial performance indicators, such as year-on-year profit growth, sales volumes, turnover and export growth.

And the study concluded Scottish firms do not anticipate things to improve in the immediate future, with respondents forecasting a further decline in the key areas over the next 12 months.

Turnover growth is expected to drop from the 3.4% recorded over the past year to 1% over the next 12 months.

ICAEW Scotland president, Andrew Hewett, said: "It is disappointing to once again see a drop in confidence amongst Scottish businesses, particularly when it takes us into negative territory. This is part of an ongoing decline in confidence in Scotland, which can perhaps be attributed to ongoing uncertainty.

"The aftermath of the referendum, the run up to the general election, the forthcoming Holyrood elections and the possibility of an EU referendum combine to mean that there is, potentially, an even deeper degree of uncertainty in Scotland than there is elsewhere in the UK, a feeling which is reflected in Scottish confidence levels.''

Mr Engel added that the Scottish business community is, however, "historically resilient''.

"Now is the time for that tenacity in the face of challenging conditions to come to the fore to resist the potential dip in economic performance that may follow,'' he said.