Scottish businesses are the least confident in the UK due to political uncertainty, a new report has claimed.
The latest ICAEW/Grant Thornton UK Business Confidence Monitor said that business confidence in Scotland has fallen into negative territory for the first time in three years, well below the UK average and the only area to record a negative confidence score in the quarter, according to its research.
Andrew Hewett, president of the Scotland branch of the Institute of Chartered Accountants in England and Wales (ICAEW) said that firms were glum due to a “deeper degree” of uncertainty in Scotland than the rest of the UK.
“It is disappointing to once again see a drop in confidence amongst Scottish businesses, particularly when it takes us into negative territory,” he said.
“This is part of an ongoing decline in confidence in Scotland, which can perhaps be attributed to ongoing uncertainty. The aftermath of the Referendum, the run up to the General Election, the forthcoming Holyrood elections and the possibility of an EU Referendum combine to mean that there is, potentially, an even deeper degree of uncertainty in Scotland than there is elsewhere in the UK, a feeling which is reflected in Scottish confidence levels. ”
Scottish businesses surveyed said they have experienced a sustained slowdown across a range of key financial performance indicators. Year-on-year profit growth has fallen from 6% to 3.3% in the second quarter of this year when compared to the same quarter last year. The report found similar decelerations in sales volumes and turnover. Export growth has seen a notable decline in recent quarters – overseas sales increased by just 0.6% over the last 12 months, compared with a 3.1% increase in the year to Q2 2014.
Nor did the accountancy body find that firms anticipate an upturn, with respondents forecasting a further decline in the growth of key indicators over the next 12 months. Turnover growth is expected to drop from the 3.4% recorded over the past year to just 1% over the next 12 months.
Kevin Engel, Grant Thornton UK’s Managing Partner in Scotland, added: “This significant drop in confidence north of the border is naturally concerning, particularly given Scotland is the only part of the UK showing such a marked negative trend. The quarter examined covers the pre-election period, which could go some way to explain the downward shift in confidence.
“However the Scottish business community is historically resilient. Now is the time for that tenacity in the face of challenging conditions to come to the fore to resist the potential dip in economic performance that may follow.”