Summary
- Scotland recorded the highest business confidence score among UK nations and regions in ICAEW’s Q3 2026 survey, rising from -21.1 to +9.5.
- Respondents reported stronger sales, exports and profits, while annual research and development growth reached its highest rate since Q1 2018.
- Labour costs remained the leading challenge, and employment fell by 1.3%. The Scottish findings were based on responses from 35 chartered accountants.
Full Article
Business confidence in Scotland has moved into positive territory and ranked highest among UK nations and regions in ICAEW’s latest Business Confidence Monitor, although firms reported falling employment and continued pressure from labour costs.
Scotland’s confidence score rose from -21.1 to +9.5 in the Q3 2026 survey, compared with a UK-wide reading of -0.5. The Scottish results were based on telephone interviews with 35 chartered accountants between 13 July and 21 September, as part of a UK sample of 1,000.
The index measures respondents’ confidence in their businesses’ economic prospects over the next 12 months compared with the previous 12 months. It is a sentiment score, rather than a percentage of businesses expecting growth.
Companies in Scotland reported growth in sales and exports, supporting a sharp rise in profits. Respondents expected strong performance to continue over the next year, alongside substantial increases in capital investment and research and development.
Annual R&D growth accelerated to 4.1%, its highest rate since Q1 2018, according to the survey.
ICAEW said the improvement in confidence may reflect businesses’ cautious optimism and resilience despite uncertainty surrounding the war in the Middle East. It also pointed to Scottish GDP growth of 0.7% in Q2, compared with 0.4% across the UK, as supporting sentiment.
Kim Johnston, ICAEW Director for Scotland, said: “Business confidence moving sharply into positive territory is a step in the right direction for Scottish companies. Our firms are the most optimistic of all UK regions and nations, which brings promise for future prospects.
“Nevertheless, geopolitical risks and labour costs were a growing challenge for more than half of our businesses, while ongoing tensions in the Middle East could impact sentiment into the future.”
Labour costs were the most widely reported growing challenge, cited by 55% of Scottish respondents, marginally above the UK figure of 53%. ICAEW said this was likely to reflect difficulties absorbing higher employers’ national insurance contributions and increases in the minimum wage.
Geopolitical risks were cited by 52% of respondents in Scotland, followed by regulatory requirements at 46% and energy costs at 40%.
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Despite the improvement in sentiment, companies reported a 1.3% decline in employment. Excluding the pandemic, ICAEW said this was the weakest reading since Q2 2010, in the aftermath of the financial crisis.
Respondents expected employment to return to growth over the next year. However, the projected increase of 0.9% was among the weakest in the UK.
