The increase in confidence comes despite growing concerns about rising business costs, with a net balance of 87.7% of respondents experiencing higher overheads. The main reasons for this include rising utility bills (61.9%), labour costs (50%) and taxes (38.3%).

Further, one in four small businesses reported increasing problems with late payments.

There was also evidence of a negative impact on jobs, with proportion of firms reducing staff numbers remaining higher (17.4%) than those recruiting (10.3%).

Guy Hinks, FSB Scotland chair, said: “These increased confidence levels are welcome after seeing such a drop in the final quarter of last year, but unfortunately the outlook of small businesses in Scotland remains negative.

“The real test is whether that trend continues. With the growing pressures facing small businesses, that is very much in the balance.

“What is vital now is the government allows small businesses to get on with what they do best, serving their customers’ needs and supporting jobs.”

Mr Hinks continued: “With the Scottish Government bringing forward the announcement of its Programme for Government for the coming year, the country’s small firms need assurance there are no further hurdles heading their way. As we told the First Minister at his roundtable to discuss US tariffs last week, the last thing they need right now is more challenges, such as any increase in the already substantial regulatory burden on them.

“It is clear rising costs and higher taxes are having a significant impact. Small businesses need to see practical and urgent government action to ease these pressures, including lower taxes and action to tackle late payments – big customers effectively treating their small suppliers as a free overdraft and paying them when they feel like it – if this renewed confidence is to turn into meaningful and sustained growth.”

A net balance of 46.37% of businesses reported a drop in profits in the last three months, an increase from 36.7% in the previous quarter. Looking ahead, a net balance of 26.6% of businesses are expecting to grow over the next 12 months, with 44.4% predicting growth and 17.8% expecting to contract.