Scottish businesses are more optimistic for the future now, compared to the end of 2020, despite ongoing concerns around the pandemic and Brexit.
The Addleshaw Goddard Scottish Business Monitor, produced in partnership with the Fraser of Allander Institute, indicates that more firms are optimistic about their volume of business and levels of employment in the next six months, when compared to the previous quarter.
Many respondents still highlighted feelings of uncertainty though, with a large minority expecting a reduction in volume of business and employment.
Confidence levels within Scottish businesses remains unsettled as the impact of Covid-19 and the UK’s new trading arrangement with the EU continues to create nervousness amongst all industries.
The Scottish construction sector has experienced a period of growth and recovery going from the sector, with the lowest sentiment in spring 2020 to the highest sentiment in the fourth quarter of the year.
However, results highlight the continued challenges the hospitality and accommodation sectors face, with more than one in 10 businesses reporting their chance of survival over the next six months as unlikely or very unlikely. This is just less than double the national average.
Since the last quarter, more businesses are reporting that home working has affected performance management of staff and productivity levels, but there has also been an increase in those expecting to permanently reduce their office footprint.
Business ratings of how the Scottish and UK Government have handled the public health crisis have remained unchanged over the quarter.
However, ratings on understanding the challenges that businesses face and supporting businesses through the pandemic have fallen slightly for both governments.
The survey showed that 38% of businesses think the level of government support has been sufficient or very sufficient, while 40% of businesses say it has been insufficient or very insufficient.
More than half of all Strategic Framework Business Fund applicants said that the level of support was insufficient.
Of the businesses which trade with the EU, 57% reported negative or very negative impacts on their trade, while 1% reported positive impacts.
Economic uncertainty continues to be the most important issue affecting businesses over the coming three months – 98% of responding firms reported business uncertainty as ‘important’ or ‘very important’ – with 94% also reporting policy uncertainty as an important issue.
During the fourth quarter, a much larger proportion of small businesses reported falls in volume of business than medium or large firms. However, all three groups reported a similarly negative net balance in employment.
Mairi Spowage, acting director at the Fraser of Allander Institute, explained that the survey marks a year of negative sentiment in the Scottish business base, for the first time since the financial crisis.
“Changes in the way many sectors are working will have long term implications for the Scottish economy.
“Many businesses are concerned that home working is impacting negatively on staff management and productivity, while plans to permanently reduce office footprint will have implications for town and city centres.
David Kirchin, head of Scotland at Addleshaw Goddard, added: “Perhaps unsurprisingly, most firms are expecting Scottish economic growth to be weak in 2021 with only 8% of respondents expecting strong or very strong growth in the coming 12 months.
“While the future certainly holds challenges for thousands of businesses, we must take some positivity from the latest findings as the majority of respondents (60%) report having secure levels of cashflow over the next six months.”
Launched in 1998 – and now in its 23rd year – the Scottish Business Monitor is compiled responses from over 500 businesses across Scotland, from a range of sectors, on issues such as business activity, investment, employment prospects and costs.