Malcolm McPherson

The latest Scottish Business Monitor, produced in a partnership between the Fraser of Allander Institute and international law firm Addleshaw Goddard, found an uptick in business confidence amongst Scottish businesses as they look forward to 2020.

This comes on the back of activity over the last three months of 2019 (October to December) remaining positive but fragile, with the Scottish economy growing 0.3% over the quarter and 0.7% over the year.

Expectations of growth in the Scottish economy over the next year have also improved, with more firms believing the outlook for growth is ‘moderate’, and less believing it to be ‘weak’.

Businesses remain cautious about how Brexit negotiations could impact on them, with knock-on implications for investment, staffing and growth.

New business activity remains weaker than a year ago, but expectations of future new business looking optimistic across all sizes of enterprise.

The detailed results from the Scottish Business Monitor are drawn from around 500 businesses’ survey responses between mid-December and January.

The FAI Business Activity Index, a measure of Scottish business activity, remains unchanged since the last quarter (5%), just below the three-year average (8%).

The net balance of +5 indicates that, on average, Scottish businesses experienced continued growth in the latest quarter.

The majority of businesses, particularly large businesses, expect turnover in the coming months to be higher than lower.

Capital investment fell back in the latest quarter, with a net balance of 9% of firms reporting a decrease.

The majority of businesses (76%) expect costs to increase over the next six months.

Exports have fallen deeper into negative territory (-11%) and expectations of future export activity remain poor.

This compares to UK GDP growth over the same periods of 0.4% and 1.1% respectively.

Commenting on the findings, Graeme Roy, director of the Fraser of Allander Institute, said: “Whilst there is little evidence of a significant ‘Boris Bounce’ in Scotland, the results of this post-election Scottish Business Monitor show some signs of a turnaround in sentiment within Scotland’s business community.

“The survey results show a shift away from firms reporting that they see the outlook as ‘weak’ to one where they are now ‘moderately optimistic’ about what the next six to 12 months will bring. So perhaps no cause for major celebration – particularly with many businesses reporting ongoing concerns about how the Brexit negotiations may evolve over 2020 – but a welcome finding after a challenging 2019.”

Malcolm McPherson, senior partner at Addleshaw Goddard in Scotland, said: “This survey provides one of the first robust indicators of post-election economic conditions and is, therefore, a timely measure of business sentiment.

“The figures show that, while last month’s general election has provided a degree of clarity for business, firms remain uncertain of the future as EU trade negotiations loom.

“Nevertheless, this picture of relative fragility must be set in context with the figures indicating that Scottish businesses on average experienced continued growth in Q4.

“While expectations of future business activity and turnover appear more optimistic across all businesses, there seems to be less confidence in the level of future capital investment and export activity.

“Furthermore, a majority of businesses expect increasing cost pressures in the coming months and have poor expectations of future export activity, which puts future growth in question.”