Martyn Kendrick

Despite a dip in overall sentiment, businesses in Scotland demonstrated a stronger outlook regarding their own trading prospects, which rose 14 points to 53%. This increase offset a 17-point drop in optimism about the wider economy, which fell to 32%. This gives a headline confidence reading of 42% (vs. 44% in December 2024).

Looking ahead to the next six months, Scottish businesses identified their top target areas for growth as evolving their offering, for example by introducing new products or services (41%), investing in their team, for example through training (36%) and introducing new technology, for example through AI and automation (36%).

The Business Barometer, which surveys 1,200 businesses monthly and which has been running since 2002, provides early signals about UK economic trends both regionally and nationwide.

National picture

Overall, UK business confidence fell two points in January to 37%.

While firms’ optimism in their own trading prospects strengthened four points to 51%, their confidence in the wider economy dropped seven points to 24%.

For the third month in a row, London was the most confident UK nation or region in January (55%), with the West Midlands following behind (51).

Sector insights

There were similar falls in manufacturing, construction and retail this month, with a slight increase in services. Confidence fell to 38% in manufacturing (down 4 points), 36% in construction (down 5 points), and 40% in retail (down three points). However, confidence in services increased by three points to 38%.

These results come within a general trend of larger confidence declines in retail and services in recent months. Within the services sector, confidence has notably fallen in hospitality but has remained more stable in business services and health-related services.

Martyn Kendrick, Scotland director at Bank of Scotland Commercial Banking, said: “Even though overall confidence has fallen, it’s incredibly encouraging to see Scottish businesses report a stronger outlook when it comes to their own trading prospects. 

“The country’s businesses have their sights set on growth, and it’s great to see firms setting out clear plans to seize new opportunities as we get underway with the new year – whether that’s through investing in their people or introducing new products and services. We’ll continue to be by their side every step of the way.”

Hann-Ju Ho, senior economist, Lloyds Commercial Banking, said: “Changes in confidence can sometimes be sudden and sharp, but what we have seen recently has been a more gradual and measured decrease over time.

“The figures for trading prospects show promise with businesses signalling more resilience and assurance in their ability to weather perceived economic headwinds. The regional picture is similarly a cause for optimism, with seven regions reporting higher confidence, meaning it is the first time since July there has been more confidence rises than falls regionally.

“Elsewhere, the results for hiring prospects are in line with other trends from this month’s survey – dipping slightly by one point to 32%. Price expectations have fallen too, for the third month out of four.”