Brexit ‘friction’ cited as Scottish business confidence plunges to lowest level in UK

BUSINESSES in Scotland have been branded the “least confident” in the UK after sentiment plunged from its peak at the end of 2021, a new survey has found.

Rising costs, staff shortages and domestic sales and exports lagging the UK average were cited as sentiment was measured at 16.3 on the latest ICAEW (Institute of Chartered Accountants in England and Wales) Business Confidence Monitor, published today. The reading, based on a survey of accountants in Scotland carried out between October 18 and January 14, was down from 42.2 in the previous quarter.

The survey found the decline in confidence was likely to have been related to a modest increase in sales, which were 4.6% lower than the UK average of 5.3%.

Export growth was also have found to have lagged the UK average, “with post-Brexit trading frictions a probable factor”. Export sales increased by 1.5% year-on-year in Scotland, compared with 2.2% for the UK.

In other findings, respondents said they expected to pass higher costs on to consumers, with selling prices set to rose by 2.5% in the next year. The price rises would offset the impact from higher costs, which are expected to grow by 5.1%, the survey added.

Nearly half of businesses cited the availability of non-management skills and staff turnover as growing challenges, as Scottish firms saw average total salaries increase by 1.7% year-on-year during the quarter. Salaries are forecast to rise by a further 2.6%, which would be the joint sharpest increase in eight years.

David Bond, ICAEW director for Scotland, said: “After a peak in confidence at the end of last year, Scottish businesses are now the least optimistic of any part of the UK. Businesses tell us they are concerned with staffing problems and increased costs, while sales growth was lower than the UK average. Nevertheless, domestic sales and exports are set to increase over the next year, alongside profits.

“As companies look to the future, the UK government’s plans for levelling up could help boost Britain’s post-pandemic economic recovery. We hope the private sector will be able to engage with both Holyrood and Westminster to play a key role in achieving growth.”

Mulling the outlook, Scottish firms expect to grow sales at a smaller rate than across the UK as a whole, forecasting domestic sales expansion of 5.5% and an export rise of 3.7% in the year ahead.

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