By Scott Wright

ONGOING skills shortages, high energy costs, and rising interest rates have been cited as Scottish business confidence tumbled for the fifth quarter in a row, a key survey has found.

The latest Business Confidence Monitor from the Institute of Chartered Accountants in England and Wales, published today, placed sentiment in Scotland firmly in negative territory in the fourth quarter as the UK stands on the brink of what the Bank of England has warned will be the longest recession since records began.

The ICAEW survey asks accounts to describe how confident they are in the economic prospects for their business compared with the previous year. A reading of + 100 would indicate that everyone surveyed was feeling much more confident about their prospects, while -100 signals people are feeling much less confident.

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The latest survey measured business confidence in Scotland at -16, marginally head of the UK score of -16.9. This compares with confidence scores in Scotland of -11.8, 12.4 and 16.3 and 42.2 in the four preceding quarters.

While domestic sales were found to have remained healthy in the fourth quarter, the latest findings underline the continuing impact of skills shortages in Scotland. Nearly half (49%) of Scottish businesses cited the availability of non-management skills as an issue – the highest rate since the survey began.

Staff turnover was reported as a problem by 46 per cent of companies, with salaries rising at the joint fastest rate in the UK – along with Yorkshire and the Humber – and up 4.3% year-on-year. Salaries are expected to increase at a lower rate next year, which may suggest Scottish companies expect labour shortages to ease slightly.

Scottish companies reported the biggest rise in input costs in the fourth quarter since late 2004. This was driven by a surge in global energy prices and ongoing supply-chain difficulties, with no expectation of any let-up next year.

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Selling prices rose by 3.2% in quarter four, and an increase of 3.2% is expected over the next 12 months. Companies expect profits to increase by 4.1% over the next year, the survey based on interviews with 51 chartered accountants in Scotland found.

David Bond, director of ICAEW in Scotland, said: “It is unsurprising that confidence among businesses in Scotland is firmly in negative territory given the tough economic conditions and political turmoil businesses have faced since the summer.

“As well as a number of staffing challenges, our businesses have told us that they face financial difficulties too, with issues from late payments more prevalent in Scotland than in the rest of the UK. On Thursday, the Westminster government must outline a plan to restore confidence, generate environmentally sustainable long-term economic growth, and bring opportunity and prosperity to our left-behind communities and regions.”

Separately, business confidence in Scotland was found to have declined three percentage points in October on the latest Accenture/ S&P Global Business Outlook, continuing a downward trend.

At +14%, the net balance of manufacturing and service sector firms in Scotland expecting activity to increase in the next 12 months was lower than the UK average of +18%, but ahead of the European average (+4%). Scotland’s October score compared with net balances of +17% in June and +34% in February.

Meanwhile, a survey from Henderson Loggie with Aberdeen & Grampian Chamber of Commerce found three in five (59%) of businesses have plans to grow in the year ahead and 37% aim to strengthen existing activity levels.

Scottish business activity is on a par with Northern Ireland and Wales, lagging three points behind the UK average, the survey found.