Business confidence in Scotland remains subdued but is higher than the UK average a survey has found.
The Institute of Chartered Accountants in England and Wales found Scottish companies are more positive about their domestic sales prospects than most other UK regions or nations and expect growth to continue at around the current rate.
However, Scottish companies are facing a squeeze on profits as they struggle to increase sales prices amid uncertainty about the outlook for the economy although their costs are increasing faster than for firms elsewhere in the UK.
The ICAEW said 38% of respondents to its Business Confidence Monitor survey identified concerns about customer demand as a growing issue, which it said was a considerable increase from Q2.
It found salary increases reached a record high of 5% in Scotland in the latest quarter. This was the highest growth rate in the UK.
“It’s promising that Scottish businesses are more confident than the UK average, but challenges remain,” said ICAEW Scotland director David Bond.
“Sentiment remains below pre-pandemic levels, and concerns over access to capital, late payments and customer demand have all got worse, while input and selling price inflation also outpaces the UK figure.”
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Businesses are feeling the impact of pressures on consumer spending resulting from the surge in inflation fuelled by Russia’s war on Ukraine. Resulting increases in interest rates which have made mortgages more expensive are weighing on the housing market. The impact may be felt most keenly in areas of southern England in which house prices increased rapidly amid the recovery from the pandemic.
The ICAEW said: “Overall in the UK, business confidence remains low – particularly in the construction sector – as concerns over high interest rates and weakening sales growth persist.”
The confidence reading for Scotland remained at 6.4 in the latest quarter. The average reading across the UK fell to 2.9 from 6.1.
A negative reading means confidence has decreased. The highest possible reading is 100.
On Tuesday economists at the University of Strathclyde’s Fraser of Allander Institute revealed they had slashed their forecast for growth in Scotland’s economy to 0.2% for this year from 0.5% in June.
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Director Mairi Spowage said many businesses appeared to be delaying or cancelling investment due to the high interest rate environment and wider economic uncertainty.
The ICAEW said the Business Confidence Monitor findings reflected responses by 42 Chartered Accountants based in Scotland to a telephone survey conducted between June 26 and September 22.
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