Business confidence in Scotland has fallen into negative territory as the country’s companies deal with the coronavirus pandemic, according to a new report from chartered accountancy body ICAEW.
The fourth quarter Business Confidence Monitor showed that Scottish businesses are also struggling amid the uncertainty of the UK’s future trading relationship with the European Union.
Half of Scottish businesses said customer demand was a growing challenge, while more than a third (37%) said competition in the marketplace competition was an increasing issue – the latter being the highest rate in the UK.
Companies reported a decline in profits in the year to the fourth quarter, but it is likely that this would have been deeper without a fall in labour costs. ICAEW figures showed that Scottish businesses reduced wages at a sharper rate than any other part of the UK – down 1.7%.
A higher proportion of companies cited late payments as a more pressing issue than a year ago, reflecting the difficult financial conditions people and businesses have faced.
Businesses said they did expect some sales improvements over the next year, but the tiered lockdown restrictions in place across Scotland will impact any recovery.
David Bond, ICAEW regional director for Scotland, said: “Businesses hope for a better year ahead, but any new lockdown measures could clearly have an impact on a recovery.
“A lack of clarity over UK-EU trade talks has added to concerns for Scottish businesses, so we hope the government will make every effort to reach a fair deal for the UK, which will be vital for the UK’s post-pandemic economic recovery.”
Across the UK, the research suggested that the proportion of companies struggling from a lack of demand had increased from more than a third during the fourth quarter of 2019 to over half this quarter.