Business confidence in Scotland increased to its highest point since the pandemic began in March, rising 29 points month-on-month to minus 9% during December.
The latest Business Barometer from Bank of Scotland Commercial Banking showed that Scottish firms’ optimism towards the economy increased by 38 points month-on-month to minus 12%, while confidence in their own business prospects rose 20 points to minus 7%.
Businesses’ hiring intentions showed that a net balance of 33% of businesses in Scotland expect to reduce staff levels over the next year, down 10 points on last month.
The survey was conducted among 1,200 businesses – including 98 businesses in Scotland – between 25 November and 10 December.
The overall ‘balance’ of opinion weighs up the percentage of firms that are positive in outlook against those that are negative, with responses weighted to reflect the composition of the economy.
Across the UK, overall confidence saw its largest monthly increase for more than four years in December, following vaccine progression announcements.
Fraser Sime, regional director for Scotland at Bank of Scotland Commercial Banking, said: “The roll-out of the vaccine should buoy spirits further as it helps to bring light to a Covid-19 exit strategy, but this optimism could falter in coming months with continued uncertainty over lockdown restrictions.”
Economic optimism rose 23 points to minus 5%, while firms’ confidence about their trading prospects increased 11 points to minus 3%.
All 12 UK nations and regions saw a rise in overall confidence during December.
The most marked improvements were reported in Scotland (up 29 points to minus 9%); the South West (up 22 points to 5%) and the West Midlands (up 22 points to 4%).
The South West recorded highest confidence at 5%, followed by the West Midlands and South West, each at 4%. The North West had the lowest confidence during December at minus13%, despite confidence increasing month-on-month by 15 points.
In terms of industry sectors, confidence reached the highest levels seen since the start of the pandemic.
Manufacturing reported a strong rebound this month, despite looming uncertainty during the survey period about the UK’s new trading arrangements with the EU, surging by 25 points from minus 25% to 0%.
This was followed by a growth in confidence for construction, which rose by 18 points to minus 5%; services, which jumped by sixteen points to minus 5% and the retail sector which reported an 11 point lift in confidence to minus 1%.
Paul Gordon, managing director for small and mid-sized corporates at Lloyds Bank Commercial Banking, said: “Despite the regional restrictions across the UK, it is promising to see regions beginning to report above-average confidence figures.
“We know that confidence has been volatile in 2021, it is positive to see this sharp rise in confidence and we hope this continues through to the New Year.”