Concern over interest rates has seen a significant increase over the quarter, rising from 37% of firms in the last quarter to half of firms, which is a five-year survey high. Concern over inflation remains high among all firms but has eased generally over the quarter down to 70% from 75% in the last quarter.

According to the indicator, less firms are indicating that they will raise prices this quarter compared to last, with just under half of firms (48%) saying they will raise prices compared to 55% last quarter.

While more firms continue to report rises in investment than falls on balance, over half (55%) have reported no changes to total investment, which is a five-year survey high.Over half of firms (57%) have also reported no changes to training investment levels, this is another five-year survey high.

Stephen Leckie, president of the Scottish Chambers of Commerce, said: “These results indicate challenging trading conditions for firms, with inflation, interest rates, and labour shortages preventing growth and delaying investment. For too many businesses, the priority is firmly stuck on survival.

“Whilst business confidence is starting to pick up from the low levels of 2022, this renewed optimism is not translating into sustained performance and output from firms necessary to get our economy firing again.

“If Scotland is to maintain its competitiveness domestically and internationally, direction and impetus is needed from government north and south of the border in upcoming budget statements. These must outline clear steps to support business which instil confidence for investment and help stimulate growth.”

Commenting on investment, Mr Leckie added: “Scottish firms and indeed firms across the UK are actively pausing investment decisions.

“Businesses urgently require upcoming fiscal events to provide some respite for those struggling to survive and incentives for those looking to expand.

“To that end, we urge the Scottish Government to use the progress made through the New Deal for Business to demonstrate that it can listen to business and take action that will support growth, such as maintaining a fair personal taxation regime, reviewing non-domestic rates, and reducing regulation.”

On the labour market, he concluded: “While recruitment difficulties have broadly stabilised for firms, they are still significant and labour continues to be the leading source of cost pressures as a result of wage settlements and pressures.

“These challenges demonstrate the importance of further measures to support firms recruiting and help people back into work.

“Policymakers must do more to help businesses invest to tackle the skills crisis and, at the same time, find ways to ease sectoral labour supply pinch points, through training programmes and opening up the immigration system to plug the gaps in the workforce.”