Business confidence up but experts warn outlook 'tricky to sustain'

Scottish business confidence has increased for the first time in almost two years, a survey has shown.

The Federation of Small Businesses (FSB) found that despite the increase in confidence following 18 months of decline, Scotland lags far behind the UK and remains in negative territory, and it warns the bounce would be "tricky to sustain".

The FSB's latest business confidence index found the Scottish figure rose from -28.9 points at the end of 2016 to -9.6 in the first three months of this year, while the UK figure climbed from 8.5 points to 20 in the same period.

Respondents reported a marginal 0.3% overall increase to their workforce, reversing the decline of the previous quarter by more than 10 percentage points, and 7.8% of firms predicted they will boost staff numbers over the next three months.

A majority of Scottish firms predict sales and turnover growth in 2017, with a 10 percentage point rise from the previous quarter, but the study also found revenues had declined at the fastest rate for four years with 42.3% reporting a fall, giving a net balance of -11%.

The state of the domestic economy was highlighted as the largest barrier to growth by almost half of respondents, 49%, although this has fallen eight percentage points in a year.

Four in 10 firms cited consumer demand as a brake on growth, while a quarter blamed skills shortages and an increasing number of firms raised concerns about rising costs for inputs, fuel and utilities.

FSB said the statistics suggest Scottish economic growth will remain below trend in the near future.

Andy Willox, FSB's Scottish policy convener, said: Scottish business confidence couldn't fall much further at the end of 2016. A bounce at the start of this year is welcome, but looks like it will be tricky to sustain given that firms are reporting falling revenues.

Too few Scottish businesses have faith that our economy is travelling in the right direction. The UK Government needs to convince firms that their plans for Brexit will safeguard their interests. The Scottish Government and our local councils also need to put local growth at the top of their agenda.''

He called for an expansion to the employment allowance, moves to tackle late payments from big businesses and investment in infrastructure to help small firms drive local growth.

A total of 1,297 FSB members, 306 in Scotland, responded to the Verve survey which took place between January 30 and February 17.

• Federation of Small Businesses