BUSINESS confidence in Scotland has sharply increased to its highest level for more than two years and is above the UK average, according to a recent survey.

The Institute of Chartered Accountants in England and Wales (ICAEW) surveyed business leaders and tracked sentiment using a Business Confidence Monitor (BCM) which found confidence was at a high in Scotland for the first quarter of 2024.

The index number was sharply up from the previous quarter and is well above the historical average for Scotland as it is at its highest level in more than two years.

Employment growth in Scotland is also up as it increased by 2.6% in the first quarter of 2024, which is more than double the historical average, while salaries increased by 3.1%.

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The ICAEW believes one of the reasons behind the spike in business confidence in Scotland is likely attributed to the growth of exports, which are up 4.4% and are ahead of all other countries in the UK.

David Bond, director of ICAEW in Scotland, said profit growth is also a large contributing factor to the boom as it stood at 4%, outpacing the UK average of 2.6%, which he insists is encouraging.

However, Bond does warn the Scottish business landscape could worsen in the next year.

He said: “It’s encouraging that business confidence in Scotland has risen significantly to the highest level for two years, with sentiment likely boosted by lower inflation, strong export growth, and high-profit growth.

“However, concerns about regulatory requirements and the tax burden weigh higher on Scottish businesses than their counterparts in other parts of the UK.

“The UK economy is less resilient than it should be, leaving it vulnerable to shocks and less agile to embracing innovation.

“Building an economy with resilience at its core, an end to weak productivity, and making the UK the best place to run a business, must be among the next government’s top priorities.”

According to the BCM Scotland is predicted to have the weakest annual profit growth in the UK for next year, which is coupled with the slowest increase in selling prices at just 3%.

Domestic sales growth did fall slightly in the first quarter but has remained higher than Scotland’s historical average and business owners predict this will slowly increase later in the year.

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Research and development budgets are also predicted to rise more slowly in the next year and are marginally behind the UK average and much lower than Scotland’s historical average.

Regulatory requirements and tax burdens were identified as the biggest challenges for business growth for Scottish companies and the ICAEW believe income tax changes in Scotland could be a concern for companies.