Scottish businesses continue to outshine their counterparts across the UK in terms of confidence, according to the latest ICAEW Business ...

Facebook
X
LinkedIn

Scottish businesses continue to outshine their counterparts across the UK in terms of confidence, according to the latest ICAEW Business Confidence Monitor. Although sentiment dipped slightly in the fourth quarter of 2024, Scotland’s confidence rating of 13.1 remains significantly higher than the UK average of 0.2 and well above historical norms.

Confidence Boosted by Strong Sales and Exports

Scotland’s optimism stems largely from robust domestic sales and export growth, some of the strongest in the UK. This trend is expected to continue into 2025, driven by key sectors such as energy and water.

David Bond, director of ICAEW Scotland, commented:
“Although business confidence in Scotland has taken a slight knock following the tax rises announced in the Autumn Budget, it’s pleasing to see our companies remain optimistic for the year ahead. Domestic sales and exports were strong this quarter and are expected to maintain this trend. As a result, Scottish companies are predicting the strongest rise in profits out of any UK nation or region in the year ahead.”

Tax Burden Tops Concerns for Scottish Businesses

Despite the optimism, the rising tax burden is causing concern among business leaders. 43% of Scottish respondents cited tax as their primary challenge, marking a record high for the survey and one of the highest levels across the UK. Regulatory requirements also remain a concern, with 34% of businesses highlighting it as a significant challenge.

Bond called for government action, stating:
“We hope governments in Holyrood and Westminster will prioritise measures to boost the wider business environment and provide businesses with the clarity and stability they need.”

Inflation and Costs Show Signs of Moderation

Input price inflation declined in the fourth quarter, with Scottish businesses forecasting a further slowdown in the months ahead. This aligns with national trends and is partly due to low inflation expectations in key Scottish industries such as energy and manufacturing. Selling price inflation also eased to 2.6%, with further moderation anticipated in 2025.

Challenges and Opportunities Ahead

While employment growth in Scotland hit a survey high in 2024, increases in costs and salaries limited profits growth to 3%, trailing both Scotland’s historical average and the UK average. However, businesses are optimistic about the future, with profit growth of 6.3% projected for 2025, the highest forecast among UK regions.

Research and development spending is also set to increase at one of the fastest rates in the UK, highlighting Scotland’s commitment to innovation. However, investment growth is expected to slow to 1.7%, slightly below the UK projection, due to economic uncertainty and high interest rates.

National Picture

Across the UK, business confidence has fallen to its lowest point in two years, hovering just above zero. Record tax concerns and a slowdown in domestic sales have dampened optimism. Nevertheless, Scotland’s strong sales performance and investment in innovation position it well to navigate the challenges ahead.

This report underscores the resilience of Scottish businesses while calling for targeted government support to address tax concerns and foster a stable, growth-oriented environment.

Related stories from SBN

New business agreement to boost business between Glasgow and Germany
BrewDog founder launches Government ‘efficiency watchdog’, following Musk’s lead
Dundee’s DEW products accelerates global expansion with Michelin Development support
Renewed partnership to boost disability sport in Scotland
Equinor UK joins energy leaders’ Coalition to drive gender balance and inclusion
New custom site designation strengthens position of Inverness and Cromarty Firth Green Freeport as a world-leading renewables hub

Other stories from SBN