Business confidence in Scotland dipped marginally in the last quarter, while nationally it plummeted, leaving Scotland the most confident region in the UK, according to the latest data from the Institute of Chartered Accountants in England and Wales (ICAEW).
The quarterly Business Confidence survey revealed the index for Scotland in the final quarter of 2024 was +13.1, down from +14.2 in Q3 but significantly above the UK average and the region’s historical average of +6.3.
Nationally, the index fell to its lowest level in two years, from +14.4 to +0.2, dropping below the historical average of +5.2.
Scottish businesses’ optimism
The optimism of the Scottish market was supported by strong domestic sales and export growth, and employment growth.
Strong growth in sales in Scotland can be viewed as a real positive for the Scottish market given that businesses also reported above-average cost and selling price inflation in the year, although they expect this to significantly level off over the next 12 months.
Capital investment growth in Scotland was also stronger than most other parts of the UK, however, increased economic uncertainty coupled with continued high interest rates means Scottish businesses are expecting to reduce investment growth in the coming year.
Navigating Autumn Budget impact
A fallout from the 2024 Autumn Budget is that the tax burden is now the most widespread, rising challenge for Scottish businesses, overtaking regulatory requirements. This is expected to impact the strong employment growth the Scottish market has witnessed of late with businesses expecting to reduce the rate they expand their staff levels over the next 12 months and to reduce salary growth.
The report shows that business confidence is influenced by many factors, some of which can be controlled, and some outside a business’s influence. It is important for business owners to focus on areas they can influence and control, and plan carefully around these.
Understanding your numbers and knowing exactly how much money is coming in and going out is the first step to taking control. Identifying areas where you can cut costs or increase efficiency through automation can also be key. Consider renegotiating contracts with suppliers to get the best possible price for your business.
Taking actions such as these should enable your business to maintain profitability levels in anticipation of increased challenges over the coming year.
With the increased tax burden and increases to National Minimum Wage/ National Living Wage having the largest impact on business confidence, it is important for businesses to be aware and to forecast the impact this will have, ensuring they are maximising available reliefs such as capital allowances and Research & Development Tax Credits to reduce their tax burden.
If you would like advice and support for your business, please get in touch. Call 0808 144 5575 or email help@armstrongwatson.co.uk.
