Economy

ICAEW: Scottish firms confident of a return to growth in 2021

2020 saw the largest drops in Scottish businesses’ domestic sales and exports since the ICAEW’s Business Confidence Monitor began

Scottish firms are confident the economy will see a return to growth in 2021, according to the Institute of Chartered Accountants in England and Wales’s (ICAEW) Business Confidence Monitor (BCM).

Confidence among Scottish companies has risen to +7.7% in the first quarter of this year, primarily due to the success of the country’s mass vaccination programme.

Despite confidence for the year ahead, however, Acottish firms have still been hit by the impact of the pandemic, and 2020 saw the largest fall in Scottish businesses’ domestic sales and exports since the ICAEW’s survey began.

In addition, domestic sales in Q1 for 2021 are 3.5% below their level of a year ago, the steepest contraction across the UK, while exports are down 1.7%, year-on-year, with only Yorkshire and Humber in England experiencing a sharper decline.

The latest ICAEW monitor also found that Scottish companies have barely increased their capital spending and Research and Development (R&D) budgets over the past year, by just 0.3% and 0.5%, respectively.

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Investment rates are also projected to remain “subdued” in the year ahead, with the pace of R&D budget growth to remain the same as in the past year (0.5%), while capital investment is forecast to rise by a “modest” 0.6%.

However, firms are still forecasting a rebound in domestic sales and exports of 4.6% and 3.6%, respectively for later in the year, with employment expected to rise by 1.9% in a year’s time.

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