Companies in Scotland reported higher confidence in their own business prospects month-on-month, up 12 points at 53%. When taken alongside their optimism in the economy, down two points to 19%, this gives a headline confidence reading of 36%.

Scottish businesses identified their top target areas for growth in the next six months as evolving their offer (47%), investing in their team (39%) and entering new markets (31%).

The Lloyds Bank Commercial Banking Business Barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationwide.

A net balance of 24% of businesses in Scotland expect to increase staff levels over the next year, down five points on last month.

Overall UK business confidence increased to its highest level since February last year, jumping 10 points to 41% in August. Businesses in London reported the highest levels of business confidence at 52%.

Chris Lawrie, area director for Scotland at Bank of Scotland, said: “It’s great to see confidence amongst Scottish firms climb this month and to see so many looking at avenues for growth. Businesses that invest now in new opportunities will stand themselves in good stead for the years to come.

“However, there are challenges, particularly with continued high prices which many firms are finding difficult to navigate. This makes it the perfect time for businesses to review their working capital and ensure they have the money they need to invest in opportunities as they arise.

“We’ll remain by the side of Scottish firms, providing them with the tools and support they need.”

Paul Gordon, managing director for SME and Mid Corporates at Lloyds Bank Commercial Banking, said: “We’ve seen a strong rebound in confidence, now higher than at any time since the Russian invasion of Ukraine and well above the long-run average. Business optimism is helped by the outlook on peak interest rates and the direction of travel on inflation.

“However, this month we are seeing a clear difference in confidence levels between large and smaller firms. Larger firms are continuing to feel the headwinds of the overall macroeconomic climate, while smaller firms, which are more likely to trade locally, are benefiting from the counter-inflationary measures and relative economic stability.

“We are here to support businesses of all sizes and can offer expertise not just for those who trade in the UK, but internationally as well.

“Manufacturing confidence in the UK has fallen this month once again, reflecting the overall challenges for the sector in most major economies. Some manufacturing businesses continue to experience challenges with recruitment, resulting in upward pressure on wages. The Bank of England will need to consider carefully in its next decision for interest rates.”

Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, added: “The bounce in economic optimism this month is the standout point. Our analysis shows that businesses felt relief that interest rates may be reaching their peak, alongside hopes that measures to tackle inflation are having an impact.

“With trading prospects remaining stable, and hiring and wage intentions also rising, the macro environment for small businesses and those outside the manufacturing sector is more upbeat.

“From the data, large firms and manufacturers are experiencing some degree of caution, which is likely to reflect the wider global economic environment and, for manufacturing, the rotation of spending towards services.”