Political strife reduces Scots business confidence to three year low

The latest ICAEW/Grant Thornton UK Business Confidence Monitor has revealed that the political convulsions of the Independence Referendum and General Election have pushed business confidence in Scotland into negative territory for the first time in three years.

Scotland was the only area of the UK to record a negative confidence score in the quarter and sits well below the UK average, according to the research.

Scottish firms recorded a confidence score of minus 7.4, down from a positive reading of 3.6 for the first quarter.

The UK average was 16.6.

Andrew Hewett, president of the Scotland branch of the Institute of Chartered Accountants in England and Wales (ICAEW) said that firms were glum due to a “deeper degree” of uncertainty in Scotland than the rest of the UK.

“It is disappointing to once again see a drop in confidence amongst Scottish businesses, particularly when it takes us into negative territory,” he said.

“This is part of an ongoing decline in confidence in Scotland, which can perhaps be attributed to ongoing uncertainty. The aftermath of the Referendum, the run up to the General Election, the forthcoming Holyrood elections and the possibility of an EU Referendum combine to mean that there is, potentially, an even deeper degree of uncertainty in Scotland than there is elsewhere in the UK, a feeling which is reflected in Scottish confidence levels. ”

Scottish businesses surveyed said they have experienced a sustained slowdown across a range of key financial performance indicators.

Year- on- year profit growth has fallen from 6 per cent to 3.3 per cent in the second quarter of this year when compared to the same quarter last year. The report found similar decelerations in sales volumes and turnover.

Export growth has seen a notable decline in recent quarters – overseas sales increased by just 0.6 per cent over the last 12 months, compared with a 3.1 per cent increase in the year to Q2 2014.

Nor did the accountancy body find that firms anticipate an upturn, with respondents forecasting a further decline in the growth of key indicators over the next 12 months. Turnover growth is expected to drop from the 3.4 per cent recorded over the past year to just 1 per cent over the next 12 months.

Grant Thornton UK’S managing partner in Scotland, Kevin Engel, said the significant drop in confidence north of the Border was concerning.

“However, the Scottish business community is historically resilient,” he added.

“Now is the time for that tenacity in the face of challenging conditions to come to the fore to resist the potential dip in economic performance that may follow.”