Business confidence in Scotland fell 20 points during September to 39%, according to the latest Business Barometer from Bank of Scotland.

Companies in Scotland reported lower confidence in their own business prospects month-on-month, down 20 points at 45%. When taken alongside their optimism in the economy, down 18 points to 34%, this gives a headline confidence reading of 39% (vs. 59% in August).

Looking ahead to the next six months, Scottish businesses identified their top target areas for growth as investing in their team, for example through training (44%), evolving their offering, for example by launching new products or services (39%) and introducing new technology (30%).

The Business Barometer, which surveys 1,200 businesses monthly and which has been running since 2002, provides early signals about UK economic trends both regionally and nationwide.

Overall, UK business confidence fell 12 points in September to 42%.

Firms’ confidence in their own trading prospects fell 12 points to 51%, and their optimism in the wider economy fell 11 points to 33%.

The North East of England was the most confident UK nation or region in September, climbing 13 points to 68%, followed by London (57%).

Firms across manufacturing, construction, retail and services all saw confidence fall this month. The biggest change was in manufacturing with a decline of 31 points to 31%, a two-year low. Retail sentiment fell 17 points to 40%, its lowest level in four months. Similarly, confidence in the service sector fell six points to 47%, the lowest reading since April. Construction continued to decline for the fourth consecutive month, dropping 5 points to 35%.

“Despite a fall in confidence, Scottish firms remain focused on growth – planning to invest in their people, evolve their products and services, and explore new technologies,” Martyn Kendrick, Scotland director at Bank of Scotland commercial banking said.

“As we head into the busy festive trading period, we’ll continue to support businesses across Scotland as they take the next steps in their strategies.”

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Hann-Ju Ho, Senior Economist, Lloyds Commercial Banking, said: “While increased market volatility earlier in the month may have impacted confidence, levels of trading prospects and economic optimism remain above their long-term averages.

“Businesses may find reassurance that the Bank of England is expected to reduce interest rates further in the next six months, while long-term global bond yields have calmed which, if sustained, may have a positive impact on businesses as we move into the last few months of the year.”

Paul Kempster, managing director for Commercial Banking Coverage, Lloyds Business and Commercial added:“ While business confidence has returned to levels seen earlier in the year, a range of metrics remain well above the long-term average.

“Businesses still have opportunities ahead, whether that be upskilling their workforce, evolving their products or exploring new markets.”