Business confidence in Scotland rose 24 points during March to 38%, according to the latest Business Barometer from Bank of Scotland Commercial Banking.
Conducted ahead of the Spring Budget, surveyed companies in Scotland reported higher confidence in their own business prospects month-on-month, up 34 points at 41%.
When taken alongside their optimism in the economy, up 15 points to 35%, this gives the headline confidence reading of 38%.
Scottish businesses identified their top target areas for growth in the next six months as evolving their offer (37%), entering new markets (35%) and investing in sustainability (30%).
A net balance of 33% of businesses in the region expect to increase staff levels over the next year, up 34 points on last month.
Overall UK business confidence climbed 11 points to 32% in March, with firms reporting their highest confidence levels since May last year.
On average, firms felt positive about their own trading prospects with 39% of firms expecting business activity to increase in the next 12 months - up eight points on last month - and 25% said they would increase staff levels by this time next year, up five points month-on-month.
Chris Lawrie, area director for Scotland at Lloyds Bank Commercial Banking, said: “Scottish businesses are feeling confident about the months ahead and It’s great to see firms' optimism in the overall economy is at its highest level since May 2022.
“With the winter months behind us, firms will likely be preparing for the brighter - and often busier - summer period.
“Businesses that keep a close eye on cash flow and manage their working capital will be best placed to capitalise on opportunities.“
There was a broad rise in business confidence across all sectors, particularly in construction (47% up 28 points) and manufacturing (37% up ten points) both at a 10-month high and retail (32% up 11 points) the highest since February 2022.
Hann-Ju Ho, senior economist Lloyds Bank Commercial Banking, added: “With hiring intentions improving, we may see employment growth picking up in the coming months.
“Tentative signs of easing wage pressures suggest that businesses’ difficulties in finding staff may have started to ease.
“Although the measures in the Budget were widely trailed, it is yet to be seen what the full impact of the Chancellor's announcement, along with the surprise rise in inflation and recent increase in interest rates, will have had on business confidence.”
Don't miss the latest headlines with our twice-daily newsletter - sign up here for free.
