Scottish business confidence hit as Sterling slump sees inflation burden increase

The organisation’s Business Confidence Monitor published yesterday showed Scottish businesses recorded a confidence score of minus 5.1 for the latest quarter.

However, this represented a modest improvement on minus 11.9 in the previous three months.

The ICAEW survey also revealed that there has been 2.4 per cent growth in domestic sales for Scottish businesses over the last year, with a 3.4 per cent increase anticipated by companies in the coming 12 months.

It shows Scottish businesses expect an overall rise in exports of 4.9 per cent over the coming 12 months, an acceleration from 3.2 per cent growth in overseas sales over the past year.

Meanwhile, the impact of the pound’s fall in the wake of the Brexit vote was reflected on food prices and the price of oil in sterling terms, constituting a significant contributing factor to a jump in cost inflation for businesses.

The ICAEW report said this had hit confidence, with input price inflation rising 1.9 per cent in the past 12 months versus 0.3 per cent a year ago, driven by the double-digit fall in the value of sterling.

The ICAEW also reports that businesses intend to pass on these higher costs to customers, with sales prices forecast to rise by 1.1 per cent over the coming year after two years of no significant increases.

The survey also shows 23 per cent of businesses are increasingly challenged by the availability of non-management skills, compared with a year ago.

ICAEW Scotland president Andrew Hewett, said: “While it is always a concern that confidence remains in negative territory, it is somewhat encouraging to see it improving over the last few quarters – albeit slowly.

“There is no doubt that some uncertainty remains amongst business professionals in Scotland, but the fact that there is a degree of optimism over the outlook for the coming 12 months, suggests that there is a belief that things have the potential to improve.”

More positively, Scottish domestic sales rose 2.4 per cent over the past year and are expected to rise 3.4 per cent over the coming 12 months.

“Predictions for the year ahead also look rather bullish for exports”, with growth of 4.9 per cent anticipated,” the report said.