Almost half of Scottish businesses believe that the Bank of England should resist raising interest rates any further as they continue to battle challenging economic conditions for trading, according to the latest Addleshaw Goddard Scottish Business Monitor (SBM) report.

The findings come as business sentiment drops slightly from a relative high in the Spring report, with most businesses experiencing a contraction in sales, turnover, investment, and export activity in Q2 of this year – only employment figures increased in Q1.

Produced in partnership with the University of Strathclyde’s Fraser of Allander Institute, the report on the second quarter of 2023 surveyed 400 firms from across the economy in July and August.

One of the starkest findings of the Q2 SBM is that around 40% of surveyed firms reported cancelling or delaying investments – primarily physical assets – over the past year. The most common reasons for these cancellations and delays have been economic uncertainty, affordability, and the cost of borrowing. Half of the firms that have cancelled/delayed investments are either unsure when they plan on making these investments or are planning them for 2025 onwards.

Professor Mairi Spowage, director of the Fraser of Allander Institute, said:

“Despite the economy performing better than we expected last year, growth over the next few years is forecast to be fairly muted which is reflected in our latest business survey.”

“Although inflationary pressures, particularly energy costs, continue to ease, a significant share of firms are putting off investments while they cope with a challenging economic landscape. This is particularly concerning when we look forward to the recovery and longer-term prosperity of the Scottish economy.”

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