Fraser of Allander Institute: Scottish business confidence remains weak

Business confidence in Scotland remains weak, according to the latest Fraser of Allander Institute Scottish Business Monitor (SBM). 

The quarterly survey suggests that fragile confidence is largely due to cost pressures, subdued investment, and a lack of expectation for short-term relief.  

The six headline indicators in the SBM, which track business sentiment from more than 250 firms across all 32 of Scotland’s local authorities, have remained negative for the fifth consecutive quarter.  

The Fraser of Allander Institute has said that this level of persistent weak confidence has been “rarely seen” since the survey was established in 1998, and it has suggested that pessimism is becoming entrenched rather than transitory.  

The report found that over the final three months of 2025, more businesses reported a decline in employment, which aligns with official data showing nearly 15,000 fewer employees on Scottish business payrolls in November 2025 compared to last year. 

Companies also reported weaker turnover during the quarter, including through the traditionally strong ‘golden quarter’. 

Nearly 80 per cent of firms reported higher total costs in recent months, while around 90 per cent expect their costs to increase in the first half of this year.  

The independent economic research unit said that despite input and energy price pressures easing, businesses are facing rising wages and employee costs. 

The survey also highlights continued weakness in both capital investment and export activity, and despite access to credit not being seen as a major constraint, economic uncertainty is impacting decision making.  

More than 90 per cent of firms cited economic and business uncertainty as “important/very important”, whilst the cost of credit has risen for fewer than half of firms. 

The institute says this suggests businesses are reluctant, rather than unable, to commit to new investment opportunities amid a subdued economic environment. 

João Sousa, deputy director at the Fraser of Allander Institute, said: “As political parties set out their economic priorities, the Scottish Business Monitor provides a timely snapshot of the conditions firms are experiencing on the ground.  

“Persistent cost pressures, weak investment and heightened uncertainty underline the importance of policy clarity and stability if confidence is to recover.”