Accountancy figures find business confidence in Scotland falls below UK average

Paul Dickson (Armstrong Watson CEO and Managing Partner)

BUSINESS confidence in the UK improved marginally in Q4 2023, though this remains below the historic average, according to the most recent survey by the Institute of Chartered Accountants in England and Wales (ICAEW).

Against a backdrop of easing inflation, with interest rates fixed at 5.25%, the findings from the ICAEW’s latest Business Confidence Survey put confidence at 4.2 on the index for Q4 2023, compared to 2.9 for the previous quarter and the pre-pandemic average of 7.2.

Nationally, customer demand remains one of the most significant challenges, with 35% of those surveyed citing it as a growing concern, reflecting the continued cost of living squeeze and the impact of high interest rates. Regulatory requirements are the other major concern – primarily an issue in the financial sector – while financial challenges relating to the tax burden, bank charges, late payments, and access to capital are listed among the other factors businesses see as a growing challenge compared to the previous 12 months.

The Business Confidence Index in Scotland fell during Q4 2023 to 2 on the index down from 6.4 and is now below both the UK average and the historical norm for Scotland.

Despite this decline, there are some notable trends, with domestic sales growth remaining steady in Scotland and outperforming most other UK nations and regions and, while export growth slowed markedly in Scotland, it is up 3% on Q4 a year ago and still exceeded all regions except for the West Midlands.

The survey also found competition in the marketplace to be a growing issue, while recruitment issues have eased, with fewer businesses concerned about staff turnover and the availability of management skills  – however 29% of Scottish businesses reported this as a growing concern.

Paul Dickson, Managing Partner and CEO of Armstrong Watson, comments: “The ICAEW’s findings provide valuable insight into the economic climate in Scotland, highlighting both challenges and areas of relative strength. The report underscores the importance of monitoring business confidence as we navigate economic changes and uncertainties.”

The ICAEW’s quarterly analysis – the largest and most comprehensive survey of business conditions and the health of the UK economy – comes ahead of the publication of the soon-to-be-released Armstrong Watson 2023 Family and Owner-managed Business Survey report, which delves into the issues businesses are facing and how they are adapting to the current economic climate.

The accountants, business and financial advisory firm surveyed 300 family and owner-managed businesses across a range of sectors in November and December 2023. Business owners shared their views about the impact of external pressures and the issues that will impact business growth over the next three years and provided insight into how they are adapting and evolving.

Paul said: “Both the ICAEW and our own research data is crucial to us in that it helps us understand the issues businesses are facing in various sectors and in different regions of the country.

“With the Spring Budget just around the corner, we hope that there will be some good news for businesses, though the Chancellor’s options seem limited as the Government’s borrowing costs have risen over recent months and there is now thought to be less ‘fiscal headroom’ than previously expected.

“We hope to see more clear guidance on the merger of the R&D schemes announced in the Autumn Statement, but it is unlikely that there will be a reduction in Corporation Tax and, given that “full expensing” for capital expenditure was made permanent in the Autumn Statement, we also don’t anticipate any further changes to capital allowances for businesses.

“As ever there will be much detail released after the headlines are digested and this is really where we find out how the announcements could impact businesses and individuals across the country.

“It will be interesting to see how budgetary decisions will impact the next quarterly ICAEW business confidence survey, and if they will help mitigate any of the concerns business owners have highlighted in the soon-to-be-released Family and Owner Managed Business Survey Report.”

UK Business Confidence Monitor: National | ICAEW

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