Business confidence in Scotland rose 28 points during the beginning of June to 50%, according to the latest Business Barometer from Bank of Scotland Commercial Banking.
Companies in Scotland reported higher confidence in their own business prospects month-on-month, up 22 points at 52%. When taken alongside their optimism in the economy, up 34 points to 48%, this gives a headline confidence reading of 50%.
The survey of 1,200 businesses each month - including 90 in Scotland - found that a net balance of 49% of businesses in Scotland expect to increase staff levels over the next year, up 20 points on last month.
Scottish businesses identified their top target areas for growth in the next six months as evolving their offer (41%), investing in their team, and entering new markets (both 34%).
Overall, UK business confidence increased by nine points to 37% in June, with all regions reporting a positive confidence reading.
The East Midlands reported the highest levels of business confidence at 52% - up 35 points on last month - the highest level of any UK region or nation this year.
Scotland reported the second highest confidence reading, followed by the north east of England at 47% (up 12 points month-on-month) and Yorkshire at 45% (up 26 points month-on-month). London and the south west of England were the only regions to report a decline in confidence.
Business confidence for firms in the service sector rose to 37% - up 11 points - the highest seen since February 2022. With the recent spell of good weather and a reduction in food and energy prices, businesses in leisure and hospitality may be able reap the rewards in the months to come, the report noted.
Manufacturing firms’ confidence also increased to its highest level since early 2022, rising to 50% - up 10 points - to outperform other sectors.
Chris Lawrie, Scotland director at Bank of Scotland Commercial Banking, said: “Many businesses will be looking forward to a busy summer period, especially with large events like the Edinburgh Fringe on the horizon which will no doubt bring excellent trading opportunities for the hospitality and leisure industry.
“It’s encouraging to see leadership teams looking to evolve their offering and making plans to invest in their colleagues too.
“This should go hand in hand with carefully managed working capital to ensure that businesses have the financial headroom to go after the growth opportunities that come their way.”
Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking, added: “Trading prospects and optimism have seen a resurgence this month, with overall confidence up in all but two of the 12 regions of the UK, which shows positive prospects across the wider economy.
“However, interest rate rises and cost pressures are still felt by many and we await to see the impact of the latest 50 basis point rise in the base rate.
“Meanwhile, expectations for average pay growth, although down slightly this month, appear to have picked up compared with the start of the year and remain elevated relative to pre-pandemic levels.”
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