Business confidence in Scotland has climbed to its highest-ever level, amid a recovery in sales and expectations of more gains to come, according to the Institute of Chartered Accountants in England and Wales (ICAEW).
The fourth quarter Business Confidence Monitor for Scotland for Q4 2021, from chartered accountancy body ICAEW, found that respondents were at their most confident since the research began in 2004.
The accountancy body put the high sentiment down to a recovery in sales over the past year since the easing of Covid restrictions, with expected further increases in the coming months.
Businesses in Scotland saw their domestic sales rise by 2.8% year-on-year, while exports rose by 1.3%.
More growth is expected and domestic sales are forecast to rise by 5.6% in the year to the fourth quarter of 2022. Export growth is also projected to pick up at 4.4% – a stronger outlook than the UK average.
As the economic recovery continues, businesses said that they planned to increase staff levels at the highest rate seen in three years.
Average salaries were also forecast to increase, following very limited growth during the pandemic, as labour market conditions tighten.
However, four in 10 companies reported staff turnover as an increasingly pressing issue. The proportion of organisations that reported problems hiring people for non-management roles as a growing issue also surged from 4% to 37% year-on-year – the highest rate seen in Scotland since the survey began.
Scottish businesses are also facing increases in input prices at a faster rate than the UK average. This has been caused by rising demand domestically and internationally, higher energy and commodity prices, and disruptions to supply chains.
The research predicted that Scottish businesses would see the joint fastest rise in input prices in the UK – at 3.5% in the year ahead – potentially the fastest increase in over a decade.
As a result of cost increases, businesses increased prices they charged customers by 1.6% over the last year, with a further rise of 3% expected for the year ahead.
Transport problems were an increasing hindrance for 44% of businesses, nearly 10% above the previous record rate of Scottish companies citing this.
A fifth of Scottish companies also stated that the tax burden had become a growing issue. This was likely to reflect concerns around government plans for higher corporation tax rates the cost of increased National Insurance contributions for the Health and Social Care Levy.
David Bond, ICAEW regional director for Scotland, said: “It’s excellent news that businesses are feeling so confident, as it indicates that an economic recovery is firmly underway in Scotland, and businesses tell us they are seeing increased sales now that most coronavirus restrictions have been removed.
“However, it’s clear that some challenges still remain, and businesses will hope these reduce as we enter the new year, so that the recovery can continue into 2022.”
58 Chartered Accountants in Scotland responded to a telephone survey between 19 July and 15 October.
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