Companies in Scotland reported higher confidence in their own business prospects month-on-month, up 23 points at 45%. When taken alongside their optimism in the economy, up four points to 30%, this gives a headline confidence reading of 37%.

The Business Barometer, which questions 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, up one point on last month.

Overall UK business confidence remained steady in January, dropping just one point from December’s reading of 40% to 39%. Firms remained positive about their future trading prospects, despite a two-point dip month-on-month to 41%, and were optimistic about the economy overall, reporting a reading of 38%, up one point on December’s result. The net balance of businesses planning to create new jobs in the next twelve months decreased marginally by four points to 29%.

Every UK nation and region maintained a positive overall confidence reading in January, with four reporting a higher reading than last month. Along with Scotland, Yorkshire and
the Humber (up 13 points to 48%), the West Midlands (up nine points to 39%) and the South West (up eight points to 37%) all had stronger confidence readings month-on-month, with Yorkshire and the Humber now the most optimistic region.

Fraser Sime, regional director for Scotland at Bank of Scotland Commercial Banking, said: “After a turbulent end to the year with the rise of the Omicron variant sparking new restrictions, it’s encouraging to see Scottish business confidence rebound as we kick off 2022.

“While the situation remains challenging, the recent easing of restrictions in Scotland will be a boost for businesses and we hope that the situation will continue to improve as the year progresses.

“We’ll remain by the side of Scottish businesses to help them overcome any obstacles and to support their growth journeys over the coming months.”

Industry sector performance was mixed during January with confidence among manufacturers increasing by three points to 43%, reaching its highest level for three months due to an easing of supply chain pressures. Retail confidence also rose (up one point to 44%) while confidence among firms in IT/communications remains particularly strong at 72%.

The impact of Omicron over the festive period meant the service sector extended its recent run of modest decreases in January, dropping one point to 38%. Positively, hospitality has recovered some of December’s decline, rising from 6% to 38%.

Paul Gordon, managing director for SME and Mid Corporates, Lloyds Bank Commercial Banking, added: “2022 has started in a positive place as Omicron infection rates have slowed and restrictions have eased following this survey, providing encouragement that there is a light at the end of the tunnel for UK businesses.

“Six regions are at or above the UK average while businesses in Northern Ireland have given another show of confidence during January, rising for a second month from its low in November of -5%.

“Although there has been mixed performance in the sectors its reassuring to see an easing of the supply chain pressures that manufacturers faced into during 2021 while the new year has hopefully brought a turn in the fortunes of hospitality firms. We remain by the side of businesses as they look forward to the year ahead.”

Hann-Ju Ho, senior economist Lloyds Bank Commercial Banking, said: “January’s survey shows a continued resilience with minimal fluctuation as economic optimism remains at a historically strong level.

“A larger decline in confidence was potentially prevented by the reduction in Covid infection rates from early January and the prospects of the easing of restrictions across the UK. However, businesses remain cautious about the pandemic and are facing into challenges from rising cost pressures although many are raising their prices in response.”