The survey, which researched UK businesses during April, found that businesses leaders rated their economic prospects at 5.5 out of a maximum score of 10. UK businesses are among the least optimistic of the six Northern European countries, with Denmark (6.8) and Ireland (6.1) most optimistic.

The Barometer highlights a clear correlation between business size and financial confidence, with smaller firms employing 10-45 staff scoring 6.1 out of 10, while medium-sized businesses employing 50-249 staff scored 6.8. Large companies are the most financially optimistic, scoring 7.3 out of 10.

Economic and geopolitical uncertainty are the principal concerns at 5.8 and 5.4, followed by talent recruitment, retention and regulatory compliance at 4.9.

Regarding talent, competition from other employers is the lead concern (41%), followed by skills shortages (39%), work-life balance considerations (36%), compensation and benefits (34%).

Businesses expect turnover, profit and headcount to increase in the next 12 months together with increased investment in digitalisation, cybersecurity, and sustainability. Firms are more cautious about international trade and expect borrowing for growth to fall in the next 12 months.

In terms of investment, 84% of UK businesses are planning to invest in cybersecurity measures, digitalisation (75%), employee retention (73%), and recruitment (69%). Employee retention will receive the largest investment, with almost one-fifth of businesses (19%) planning to invest at least £50,000 and 4% committing to invest more than £250,000.

More than a quarter (27%) of medium-sized businesses which employ 50-249 people said they will make no investment in artificial intelligence (AI) over the next 12 months but will be focused on investing in strengthening defensive security measures online.

There is increased awareness of the importance of succession planning with 58% of UK businesses scoring between 6-10 and almost half scoring 7 or higher, indicating widespread recognition of the importance of leadership and continuity. This contrasts with an average of just 46% in other Northern European markets.

Greig McKnight, Azets regional managing director in Scotland, said: “The latest Azets Barometer survey indicates that UK businesses are cautiously optimistic about the future and about the UK’s economic prospects.

“It is encouraging that many will be focusing their investment on cyber security, digital defences and is an area in which Azets is seeing significant growth in demand for our extensive cyber and digital services.

“AI, however, has moved down the priority list as a key focus in the strategic planning of most mid-sized businesses over the relatively short period of the next 12 months but we think this could change at any given point.”

Mr McKnight continued: “The importance of succession planning has clearly become more embedded in boardroom agendas, a trend that is reflected by rising demand for our expertise on how to guide business owners through a smooth transition.

“Despite more positive signs of a return to growth, many small firms are still finding trading difficult. It is critical that certainty and stability return to politics and economics as these will encourage business confidence levels and willingness to invest in their own businesses and their local communities.”