Business confidence in Scotland fell seven points during April to 31%, according to the latest Business Barometer from Bank of Scotland Commercial Banking.
Companies in Scotland reported lower confidence in their own business prospects month-on-month, down nine points at 32%. When taken alongside their optimism in the economy, down one point to 34%, this gives a headline confidence reading of 31%.
Scottish businesses identified their top target areas for growth in the next six months as investing in their team (55%), entering into new markets (35%) and investing in sustainability (32%).
The survey was conducted with 1,200 companies - including 101 businesses in Scotland - between 3 and 19 April, finding that a net balance of 32% of businesses in Scotland expect to increase staff levels over the next year; down one point on last month.
Firms' outlook on their own trading prospects remained strong at 39% for the second consecutive month, and a net balance of 27% of businesses are intending to increase their staff levels; up two points on March.
Ahead of the three bank holidays in May, firms' optimism in the overall economy increased five points to 28% - the highest reading since June last year.
Chris Lawrie, area director for Scotland at Bank of Scotland Commercial Banking, said: “Despite a small dip in overall business confidence, firms in Scotland are optimistic and many are planning on investing in their teams as they focus on growth in the coming months.
“And with three bank holidays ahead, the country’s world-famous hospitality and leisure sector will be hoping for a busy trading period as consumers make the most of the extra time off.
“Firms will need to closely manage their working capital to ensure they are ready for these peaks in demand - doing so will ensure they remain resilient and can take advantage of opportunities that come their way.”
Business confidence in the service sector rose to 36% this month, the highest since May 2022, with sentiment particularly upbeat in hospitality and financial services.
While the other sectors saw slight decreases, construction remained strong at 43%, while manufacturing and retail remain above last year’s lowest levels.
Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “The revival in the demand for labour, which improved for the fifth consecutive month, may account for the modest uptick in wage expectations for the next twelve months.
“While firms’ concerns on overall cost pressures have eased, there is little evidence that pricing expectations have declined which may impact wider pricing decisions for the remainder of 2023.”
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