BUSINESS confidence in Scotland has bounced back into the black for the first time in a year, according to new figures.

Research from the Federation of Small Businesses (FSB) shows that in the second quarter of 2019, the Scottish Small Business Index (SBI) increased by a record 37.5 points to +3.3.

The figure marks the second time since 2015 that business optimism in Scotland has been in positive territory, and follows two quarters of record-breaking lows.

In stark contrast, the UK index fell further into negative territory over the same period, down to -8.8 points from -5 last quarter.

This is the fourth straight quarter in which the UK index has been below zero, a first in its near 10-year history.

Andrew McRae, policy chair for FSB Scotland, said: “After five years lagging behind the UK average – and some record low readings over the last six months – it’s a refreshing change to see Scotland bucking the trend in a positive way.

“It’s hard to point to a single factor behind this. The mini heatwave around Easter has reportedly given some important sectors a bit of a bounce. Equally, the Brexit extension in April let businesses breathe a sigh of relief that the threat of crashing out of the EU without a deal had receded for the immediate future.

“But, this sentiment can fall back just as quickly as it has risen. We need to use this narrowing window of opportunity to get Scotland’s businesses some clarity on what the post-Brexit trading environment is going to look like.”

Although 8.9% more businesses are still reducing staff numbers rather than hiring, Scots firms have seen a boost in recruitment intentions, with 15.8% expecting to expand their workforce in the next quarter.

However, despite the positive figures, many businesses are still concerned about their situation.

Some 70.3% of respondents said that the cost of running their business is increasing, while one in two (49.3%) said utilities is the main cause of this increase.

Meanwhile, nearly half (48%) of respondents said that labour costs were the primary cause of higher costs.

As a result, four in 10 (39%) small firms reported that profit levels were down for this quarter.

South of the Border, this figure stood slightly higher at 42%.

McRae cautioned: “We shouldn’t be lulled into a false sense of security. Taken as a whole, these figures underline that we can’t take our eye off the ball when it comes to addressing day-to-day issues facing small businesses. Costs are still on the up – and if revenues don’t keep pace any remaining profit will be squeezed from the business.

“At the same time, there are a raft of new regulations on the horizon – on everything from compulsory bottle deposit schemes, to workplace parking levies, to low emissions zones. If these aren’t implemented deftly, they will present unnecessary obstacles to small businesses, at a time when they have enough on their plate.”

To calculate the Small Business Index, FSB surveyed 982 small firms between May 13 and May 27, including 101 from Scotland.

The Small Business Index, a weighted index which measures confidence in future business performance, is conducted each quarter by independent research company Verve.