Business confidence in Scotland fell 15 points to 27% in June as rising inflation took its toll, according to a report.
Optimism in the economy also plummeted to 5% – down 47 points on the previous Bank of Scotland report.
However, companies reported higher confidence in their own business prospects month-on-month, up 18 points at 49%, according to the business barometer.
Firms also identified top growth opportunities for the remainder of the year, including investing in their team, at 36%, and entering new markets, 27%.
Some 1,200 businesses are surveyed by the barometer each month as it provides early signals about UK economic trends both regionally and nationwide.
Fraser Sime, regional director for Scotland at Bank of Scotland Commercial Banking, said: “With inflation continuing to drive up prices, and many firms struggling with supply chain disruption and recruitment challenges, confidence in the Scottish economy has dipped.
“However, confidence figures remain positive overall and it’s great to see businesses planning to invest in their teams and market positions despite this exceptionally challenging economic climate.
“It’s more important than ever for firms to ensure their working capital is in good health to help mitigate any disruption and we’ll remain by the side of Scottish businesses to support them through this period so they can capitalise on growth opportunities in the future.”
UK-wide figures show business confidence fell 10 points during June to 28%, while economy optimism dropped 12 points to 21%.
Paul Gordon, managing director for SME and Mid Corporates at Lloyds Bank Commercial Banking, said: “This is a challenging time for businesses and we know that there is caution about what lies ahead in the coming months.
““With concerns about a potential economic slowdown, it is important that businesses continue to keep a tight rein on input costs where they can and a close watch on profit margins.
“Seeking advice at a time like this, sooner rather than later, can make all the difference and I would encourage business owners to be proactive and use their support networks, including their bank, to plan ahead.
“At Lloyds we remain by the side of businesses to help them navigate the challenges they face.”
Enjoy the convenience of having The Sunday Post delivered as a digital ePaper straight to your smartphone, tablet or computer.
Subscribe for only £5.49 a month and enjoy all the benefits of the printed paper as a digital replica.Subscribe