Scottish businesses expect drop in sales and profit as confidence ‘falls’

Respondents said they have cut their forecasts for expenditure on areas such as research and development as they expected growth in sales and profits to slow over the next 12 months.

Businesses are now forecasting an increase of only 1 per cent on their research budgets over the next year - less than half the rate of increase recorded in the past year.

Although confidence levels in Scotland remained in positive territory for the three months to October, they were below the level recorded a year ago, the survey showed.

It also suggested that in the last quarter, growth was weaker for both domestic and overseas sales, compared with 12 months ago.

Sales volumes increased by 3.6 per cent year-on-year - down from a 4.9 per cent rise in the same period a year earlier.

Similarly, profit growth slowed from 4.9 per cent in the fourth quarter of 2014, to 2.8 per cent in the latest quarter.

Growth in both sales and profits are projected to slow to 3 per cent and 2.5 per cent respectively over the next 12 months.

ICAEW Scotland president Andrew Hewett said: “The fluctuating confidence levels that we have seen this year show that there is still a degree of uncertainty amongst business professionals here in Scotland.

“Whilst the fact that we remain in positive territory is reassuring, this quarter’s decline in confidence should not be ignored, especially as it is coupled with anticipated decreases in spending in various areas such as research and development.

“Whether this is the usual caution we would expect to see in the run-up to the Holyrood election, a reflection of the uncertainty caused by cuts in the oil and gas sector, or something more remains to be seen - as does its impact in terms of future growth.”