POLITICAL and economic uncertainty has been cited as a key reason as to why business confidence in Scotland fell by 17 points to 0% last month, according to new analysis.

Figures published by the latest Business Barometer from Bank of Scotland Commercial Banking indicate that companies in Scotland also reported lower confidence in their business prospects in July – falling by 26 points to 6%.

The Business Barometer questions around 1200 firms each month and aims to provide early signals about UK economic trends both regionally and nationwide.

Across the UK, overall confidence was steady in July at 13% – in line with the average this year – but was below the long-term average of 24%.

Trading prospects for the year ahead fell by three points to 19%, but economic optimism rose by one point to 6%.

Employment expectations rose by one point to 12% when looking at the UK as a whole.

Fraser Sime, of Bank of Scotland Commercial Banking, said: “Current political and economic uncertainties are clearly at the forefront of Scottish businesses’ minds.

“Whatever lies ahead for businesses, we are by their side to support their growth ambitions.

“We’ve pledged to lend up to £1.6 billion to support Scottish firms this year, which we hope will allow them to hire more people, set their sights on expansion, and ultimately succeed.”

Meanwhile, Britain’s manufacturing sector remained in decline in July after the sharpest deterioration in factory orders for seven years.

The IHS Markit/CIPS UK manufacturing purchasing managers’ index (PMI) stayed flat at a reading of 48 in July, the same as in June.

A reading above 50 indicates growth.

Performance remained at its weakest level since February 2013 and it was the third consecutive month in negative territory.

The headline manufacturing figures – one of the earliest indicators of the strength of an economy – surpassed analyst expectations, with last month’s performance predicted to dip to 47.7 points.

However, IHS Markit said new orders fell as firms used up stockpiled materials, EU-based businesses moved supply chains out of the UK and weakness in the global economy hit demand.

UK manufacturing production saw its largest fall since 2012 after new orders fell due to weaker demand from domestic and overseas markets.

New export business also declined, reflecting lower intakes from the EU and China, the survey said. The downturn also hindered recruitment, as employment in the sector fell for the fourth month in a row.

Rob Dobson, director at IHS Markit, said: “July saw the UK manufacturing sector suffocating under the choke-hold of slower global economic growth, political uncertainty and the unwinding of earlier Brexit stockpiling activity.

“The weak, highly competitive environment makes a sustained revival highly unlikely in the coming months. However, a short-lived bounce leading up to October should not be ruled out, as some manufacturers are already gearing up to restart Brexit preparations.”

Despite the fall in new business, manufacturers became more optimistic as 46% said they expect output to be higher in a year’s time, an improvement on June.

The figures came shortly after the eurozone manufacturing sector revealed that last month saw the sharpest decline in performance since 2012.

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “A killer combination of economic uncertainty and the weakest production levels for seven years battered the manufacturing sector into contraction for the third consecutive month in July.

“Unsurprisingly the decline in employment levels followed suit with one of the sharpest cuts to jobs for more than six years as businesses hesitated to keep calm and carry on and build staff levels.

“However, optimism for the future stayed relatively buoyant in the hope that certainty will once again return to UK shores soon and in spite of the increase in No-Deal Brexit rhetoric.”

Seamus Nevin, chief economist at manufacturers’ organisation Make UK, said: “Today’s numbers prove that the UK economy is undeniably on a downward trajectory with output, new orders and employment all falling again. Companies are cutting back on both day-to-day spending and capital investment as the downturn in activity continues, reflecting growing fears of a crash-out Brexit and worrying global trade conditions.”