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Scottish business confidence slides as Brexit hampers outlook

Business confidence in Scotland plunged to zero per cent in July as continuing political and economic uncertainty dampened industry outlook, according to new analysis.

Figures revealed in the latest Bank of Scotland Business Barometer indicate that sentiment among Scottish companies dropped by 17 points to reach zero last month.

It marks several months of yo-yoing for the lender’s index, which previously stood at zero in May, before surging 17 points higher in June.

The index can fall into negative territory, as it represents a balance of the percentage of companies that are positive in outlook against those that are negative.

Across the UK, overall confidence held steady in July at 13 per cent, in line with this year’s average, but markedly lower than the long-term average of 24 per cent.

The Bank of Scotland report indicates that companies in Scotland reported lower confidence in their own business prospects in July – falling by 26 points to 6 per cent.

Across Scotland, a net balance of 25 per cent of companies said they felt that the UK’s exit from the European Union was having a negative impact on their expectations for business activity, down four points on a month ago.

Fraser Sime, of Bank of Scotland Commercial Banking, said: “Current political and economic uncertainties are clearly at the forefront of Scottish businesses’ minds.”

UK-wide, trading prospects for the year ahead fell by three points to 19 per cent, but economic optimism rose by one point to 6 per cent.

Manufacturing emerged as the most upbeat sector across the UK, with overall confidence rising nine points to 19 per cent and overtaking retail, which fell five points to 17 per cent. Meanwhile sentiment in the construction industry dropped 11 points to six per cent, marking the sector’s lowest reading in more than 18 months.

Paul Gordon, managing director for SME and mid corporates at Lloyds Bank Commercial Banking, said: “The UK manufacturing sector may have been boosted by the truce in the trade war between China and the US, which hopefully marks an upturn for this sector and could paint a more optimistic outlook for coming months but broader political uncertainty is expected to weigh on the outlook.”

Today’s barometer readings come after the Bank of England (BoE) yesterday warned there was a one-in-three chance of the UK economy shrinking at the start of next year as Brexit uncertainty takes its toll.

Speaking as the monetary policy committee held interest rates at 0.75 per cent, governor Mark Carney said: “Profound uncertainties over the future of the global trading system and the form that Brexit will take are weighing on UK economic performance.”

The BoE also cut its growth forecast to 1.3 per cent for both this year and next, down from the 1.5 per cent and the 1.6 per cent previously predicted.


Source: Scotsman