Business confidence in Scotland rose four points during February to 14%, according to the latest Business Barometer from Bank of Scotland Commercial Banking.
Companies in Scotland reported lower confidence in their own business prospects month-on-month, down one point at 7%.
When taken alongside their optimism in the economy, up eight points to 20%, this gives a headline confidence reading of 14%.
Scottish businesses identified their top target areas for growth in the next six months as investing in their team (43%), introducing new technology (31%) and evolving their offer (30%).
The monthly survey of 1,200 businesses - including 100 in Scotland - showed that a net balance of 1% of businesses in the region expect to reduce staff levels over the next year, down 15 points from January, when a net balance of 14% of businesses planned to create new jobs.
Chris Lawrie, area director for Scotland at Lloyds Bank Commercial Banking, said: “After a dip in confidence in January, it is good to see that businesses are once again feeling optimistic about their own trading prospects and the wider economy.
“However, rising costs, supply chain challenges and skills shortages are still affecting several key sectors across the country - as firms grapple with these challenges it’s easy for attention to pull away from seizing opportunities for growth.
“Firms that keep a close eye on cash flow and manage their working capital will be best placed to take on any unforeseen challenges and go after prospects in the months ahead.”
Retail confidence bounced back, rising 14 points - for the first time in three months - to 21%, led by improvements in both trading prospects and economic optimism.
However, business confidence fell in construction - down eight points to 19% - and services - down five points to 20% - although this remains higher than in the latter part of 2022.
Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “Business confidence has lost a little momentum this month, following the strong gains seen recently.
“Firms are feeling more cautious about the wider economy, however confidence in their own trading prospects continues to strengthen, helped by tentative signs that wage and other cost pressures may be reducing.
“While inflation appears to be tapering, pressures on consumers will need to ease further to help make it a more stable environment for businesses to operate.”
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