Scottish business confidence has continued to grow, although at a slower rate than the rest of the UK according to the latest ACCA (the Association of Chartered Certified Accountants) Global Economic Conditions Survey. The global professional body notes that the results don’t point to a downturn in confidence, just a more reserved view than seen in the South.
In terms of business confidence, Scotland entered positive territory half a year ahead of the rest of the UK and has seen more balanced confidence gains since. In fact, business confidence was largely unchanged between Q2 and Q3 (26% reporting gains and 21% reporting losses, against 24% and 17% respectively in Q2). While this does mean that business confidence is now lagging behind the rest of the UK, it points to a much more sustainable recovery in the long run.
Craig Vickery, head of ACCA Scotland, said: 'A key reason behind this divergence in business confidence is the fact that respondents in Scotland are more reserved in their expectations of economic recovery than their colleagues elsewhere in the UK – 50% (up from 38%) believe the economy is improving or about to do so, compared to 63% across the four nations. This still represents a significant improvement in perception and the first move into positive territory since the survey began.
'Respondents have reported a marginal fall in the availability of business opportunities, following a surge in early 2013. Pressures on cashflow and demand have increased, although they are still at reasonably low levels by global standards and still down year-on-year. But following a full year of improvements in the supply of growth capital, Scottish business investment in both capital and staff has surged in 2013, rising modestly in the third quarter as well. As a result, input prices have risen for a second quarter, after bottoming out in early 2013.'
Emmanouil Schizas, ACCA senior economic analyst and author of the report said: 'Government is getting some of the credit for improved conditions on the ground, although respondents in Scotland have been consistently more critical of economic policy. At 18.4% (up from 10%), approval ratings for economic policy are higher than they’ve been in a year and a half, despite respondents increasingly expecting fiscal policy to tighten again in the medium-term.'
Collectively, across the world businesses were more optimistic about the economy than they've ever been since the survey was launched, and more confident about their own prospects than at any time since the end of 2010. However, a closer look at the figures reveals that many individual markets did not share this buoyant mood and saw business confidence fall in Q3.
The threat of the Federal Reserve and other Central Banks halting or reversing their extraordinary stimulus has led to a dramatic withdrawal of investment from riskier assets, as well as most emerging markets. The survey findings suggest that the fallout has fed through to the real economy, sending many of the world’s most promising economies into a credit crunch of their own.
Emmanouil Schizas said: 'What GECS shows us is that monetary policy, real and potential, has now become a stronger influence on business confidence than demand or business opportunities. That's a sure sign of trouble brewing. The idea of a global recovery has taken hold worldwide and the business community is generally optimistic about macro-economic developments even as they doubt the prospects of their own organisations. This is not really sustainable - and it is more likely that recovery expectations are going to re-align themselves with that low business confidence, than vice-versa.'