SCOTTISH business confidence has tumbled to its lowest level since the 2008/09 recession, a survey has revealed, with optimism readings particularly poor following the Brexit vote.
The survey, published today by the Institute of Chartered Accountants in England and Wales, was conducted between April 21 and July 20 and ICAEW observed a significant deterioration in already weak Scottish business confidence following the June 23 vote to leave the European Union.
Keith Proudfoot, the ICAEW director with responsibility for Scotland, highlighted the fact that businesses would have to deal with more than two years of uncertainty while the terms of Brexit were negotiated.
ICAEW’s latest quarterly monitor shows Scottish businesses recorded a confidence score of -16.4 – the lowest since the first quarter of 2009 and well below the corresponding reading of +12.9 a year ago.
The latest reading is also down significantly from -7.0 in the previous quarterly survey.
ICAEW observed that the downturn in confidence was consistent with weaker growth in turnover and profits reported by Scottish businesses.
Asked if the confidence readings from Scottish businesses were weaker after the June 23 Brexit vote, Mr Proudfoot replied: “In the immediate aftermath, they were worse.”
He added: “Things were a bit weak beforehand, I don’t think that was just down to the vote.
“We just weren’t in a very strong economic position before the vote. I think the uncertainty following the vote has eaten into such optimism as there might have been.”
The confidence score is based on chartered accountants’ view of the economic prospects facing their business over the next 12 months, compared with the previous year.
Mr Proudfoot highlighted businesses’ dislike of uncertainty in the context of the Brexit vote.
He said: “It is just lengthened uncertainty [over] what sort of playing field have we got, what are export tariffs going to be.”
Overall turnover growth for Scottish businesses has more than halved to 1.7% year-on-year in the latest quarter, from a rate of 4.2 per cent 12 months ago, according to the survey.
ICAEW noted weaker turnover growth had been accompanied by a 0.8 per cent fall in prices charged by Scottish businesses over the last 12 months.
Its survey found that, with input prices remaining flat and salaries continuing to grow, at a year-on-year rate of 1.3 per cent, profit margins had been reduced.
ICAEW found Scottish businesses’ overall profit growth had slowed to 0.9 per cent year-on-year in the latest quarter, from a corresponding 3.8 per cent in the same period of 2015. The profit growth in the latest survey is the weakest since the first quarter of 2013.
Employment remained broadly flat, comparing the latest quarter with a year earlier.
While noting Scottish businesses were projecting turnover growth of 2.9 per cent in the coming 12 months, Mr Proudfoot said this was “pretty minimal”.
Referring to the Scottish survey findings, he added: “It is not what I was hoping to find.”
He expressed disappointment that confidence was the lowest since the first quarter of 2009.
Declaring that ICAEW’s confidence indicator had been “such a close indicator” of future gross domestic product, he added: “It does look as if things in Scotland are going to be weak for some time yet.”
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