Despite the overall drop, Scottish companies portrayed an upbeat attitude regarding their individual business outlooks, noting a rise by five points to 44%. When taken alongside their optimism in the economy, down 19 points to 10%, this gives a headline confidence reading of 26%.

Scottish businesses identified their top target areas for growth in the next six months as months as evolving their offer (37%), introducing new technology (37%) and entering new markets (31%).

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

A net balance of 33% of businesses in the region expect to increase staff levels over the next year, up two points on last month.

Martyn Kendrick, regional director for Scotland at Bank of Scotland, said: “Despite the drop in overall business confidence, it’s reassuring to see that firms across the country remain optimistic about their own trading prospects as we head into the final quarter of the year.

“As we approach Christmas, and what’s the busiest trading period of the year for many Scottish firms, those in the retail, hospitality and leisure sectors companies will benefit from maintaining a steady cashflow to remain resilient and be well-placed to seize any opportunities to grow.

“It’s no secret that Christmas can be a frenetic and expensive time for businesses and their customers, so firms need to have a plan in place to manage this, as well as having some money aside to cover unexpected costs.

“We’ll remain by the side of Scottish businesses to help them capitalise on avenues for growth in the final months of the year.”