Business confidence in Scotland fell nine points during May to 22%, 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 two points at 30%.
When taken alongside their optimism in the economy, down 20 points to 14%, this gives the headline confidence reading of 22%.
Scottish businesses identified their top target areas for growth in the next six months as evolving their offer (45%), investing in their team (35%) and entering new markets (29%).
The bank surveys 1,200 businesses monthly, finding that in May, a net balance of 29% of those in Scotland expect to increase staff levels over the next year; down three points on last month.
Overall UK business confidence dropped five points to 28% in May. Despite the dip, every UK nation and region reported a positive confidence reading.
Firms remain optimistic about their own trading prospects, with a net balance of 34% expecting business activity to increase over the next 12 months; down just five points on last month.
Chris Lawrie, area director for Scotland at Bank of Scotland Commercial Banking, said: “Despite a slight drop, business confidence figures remain positive and it’s great to see so many firms planning to invest in their teams.
“On the ground, we’re hearing that more and more companies are setting their sights on new goals in the coming twelve months.
“Whether going after new markets, or making new hires to help during busier periods, it’s important that businesses ensure their working capital is in rude health.”
Confidence among manufacturers increased to a one-year high of 40% - up from 29% - while retail registered a more modest two point rise to 26%, and construction remained robust at 34%, despite its monthly nine point decline.
Services confidence, however, fell back to 26% from 36%, almost erasing last month’s rise.
Overall, confidence across the broad sectors remains above levels at the start of the year.
Hann-Ju Ho, senior economist Lloyds Bank Commercial Banking, said: “As the economic environment remains challenging, compounded by stubborn inflation and higher wage pressures, business confidence has dipped slightly this month as firms feel cautious about the wider economy and their own trading prospects.
“However, while firms’ trading prospects and economic optimism both eased back, they still remain in positive territory as the UK has avoided an outright contraction in GDP - indicating a certain amount of underlying resilience in the economy.”
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