Scottish business confidence drops into negative territory

Business confidence levels in Scotland have fallen into negative territory for the first time in almost a year, making them among the lowest in the UK according to the latest ICAEW/Grant Thornton UK Business Confidence Monitor survey.

The decline may be a direct result of the continuing troubles of the oil and gas sector alongside a more general weakened domestic demand.

The survey shows that the confidence score for Scottish businesses has fallen from +10.4 to -7.0 in the second quarter of 2016.

Business confidence for the whole of the UK has dropped to +0.8 from +11.4.

The survey asks businesses to describe their confidence in the financial prospects facing them over the next 12 months, compared with the past year. A reading of +100 would imply that all survey respondents were confident about their economic future prospects, while a reading of -100 would indicate much less confidence, ICAEW states.

Scottish companies expect a low level of expansion to continue in the year ahead, with expectations of a rise of only 1.7 per cent in domestic sales in the coming 12 months.

Grant Thornton UK’s managing partner in Scotland, Kevin Engel said: “It’s troubling to see such a dip in confidence levels, but also understandable, given the level of political and economic uncertainty facing the nation. Our findings follow a prolonged downturn in Aberdeen’s oil and gas market, which has far reaching consequences throughout the wider Scottish economy.”

He added: “The positive news is that the energy sector looks to be slowly turning the corner with potential recovery in sight. In the meantime, what is urgently needed is collaborative action from politicians and business leaders to tackle other serious issues, including halting the decline in exports and creating world class physical and digital infrastructure.”

ICAEW Scotland president, Andrew Hewett, said: “After seeing confidence stabilise last quarter, it is disappointing to see it return to negative levels this time around.

“There are, however, many factors that may have led to this – from the on-going impact of the problems within the oil and gas sector, to the uncertainty that is often seen around an election. With the recent Holyrood elections and the upcoming EU referendum dominating the headlines, both may easily have contributed to the result.

“Add to this the fact that the UK as a whole has seen a decline in confidence in the financial sector, which of course is a major employer in many Scottish cities, and it’s easy to understand the pragmatism among those surveyed.”