CONFIDENCE amongst Scottish businesses that activity will continue to grow over the coming year is higher than the European average, according to the latest Accenture / S&P Global UK Business Outlook. Plans to increase investment, including in research and development, helped to offset concerns surrounding high inflation and staffing costs.
The net balance of firms expecting activity to increase over the coming year stood at +22%, falling from +35% in February this year. This was lower than the UK average (at +40%), however Scottish businesses remain more confident than their European counterparts, where optimism is at +19%.
The latest results show that inflation expectations from Scottish companies remain high (+53%) but these have eased from earlier in the year (+61%) and continue to decrease from the peak of +69% in June 2022. This is especially true of staffing costs, where a net balance of +38% of businesses predict wages to rise over the next 12 months, again down from +44% in February.
The number of firms in Scotland expecting a net gain in profits stood at +20%, five points higher than in the rest of the UK (at +15%).
Planned research and development spending also rose to +6% in Scotland, up from 0% in February. UK companies overall were more likely to be planning to invest in artificial intelligence in June, jumping to 29% of respondents from 18% in early 2022. Services firms were particularly keen to add AI capabilities over the coming year, linking this to a need to streamline costs amid sticky wage inflation.
AI was the fourth most popular area of technological investment in June, rising from seventh place last year. A greater percentage of companies hope to improve their capabilities around cloud technology (53%), cybersecurity (50%), and data analytics (46%).
David Caskie, Joint Managing Director for Accenture in Scotland, said: “While it is understandable that Scottish businesses remain cautious in their general outlook during the current climate, there are still plenty of encouraging signs showing their resilience.
“Inflation and staffing costs remain a concern, but confidence to invest in research and development is bouncing back, particularly when it comes to technology and AI. We reported in April that Edinburgh’s status as a European capital for the data and AI sectors is on the rise, and these recent figures around R&D and AI indicate that we’re on a continued path to achieving this.”
The full report and accompanying data are available on request from economics@ihsmarkit.com
