(Image: Colin Mearns)
After a year in which business confidence steadily deteriorated, Scottish firms are showing signs of renewed optimism about the economy.
More than a third of businesses now believe economic conditions are better than they were a year ago, according to a survey of more than 500 firms, while expectations for turnover and profitability have also strengthened. The findings represent the most positive assessment of economic conditions since the quarterly tracker began in 2023.
In the latest Understanding Business survey, conducted by Diffley Partnership and Charlotte Street Partners, 35% of businesses believe economic conditions are better than they were a year ago, up 11 percentage points on the previous survey in June. The proportion saying conditions have worsened fell to 43%, down from 54% three months earlier.
The improvement is reflected in a sharp rise in net sentiment, which moved from -30 in June to -8 in September, its strongest position since September 2025.
Looking ahead, 38% of firms expect economic headwinds to ease over the next 12 months, also up 11 points compared with June. While 37% still expect conditions to worsen, the gap between optimists and pessimists has narrowed significantly over the course of the year.
Businesses are also more upbeat about their own prospects. Almost half (46%) expect profitability to increase over the next year, up from 38% in June, while 45% anticipate turnover growth, compared with 40% three months ago.
"This wave of Understanding Business points to a notable improvement in sentiment among Scottish businesses," said Scott Edgar, head of analysis at Diffley. "While firms continue to identify significant challenges around costs, taxation and economic uncertainty, they are more likely than they were earlier this year to say that economic conditions are improving rather than deteriorating."
Conducted shortly after John Swinney secured his first electoral mandate as First Minister and Andy Burnham took charge as UK Prime Minister, the survey also pointed to more positive perceptions of both governments.
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Half of firms said the Scottish Government is taking action to address business concerns, up from 40% in June. Meanwhile, 35% said the UK Government is taking action, compared with 27% three months earlier.
When asked about the new Scottish Government's first 100 days, 56% of business leaders said they were confident ministers were focused on growing the economy, although 39% remained unconvinced that government actions would support business growth.
The survey also found strong support for one of the UK government's early business measures. More than three-quarters of respondents (77%) said Scotland should follow England in introducing a 20% cut in business rates for pubs, clubs and live music venues.
Support was also expressed for greater regional decision-making within Scotland, with 58% agreeing that the introduction of metro mayors would help promote economic growth.
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"These numbers suggest that businesses are encouraged by what are essentially two new governments," said Malcolm Robertson, founding partner at Charlotte Street Partners. "John Swinney has talked much more about economic growth, and Andy Burnham is indicating that he will take on some of the big challenges facing the country.
"However, politicians, like the rest of us, will be judged on whether these early signs of support and action are converted into good policy and the economic growth that is key to bringing down the cost of living."
Separately, the survey found Scottish businesses divided over the development of AI data centres. While 49% backed a temporary pause on approvals until the impact on energy infrastructure and communities has been assessed, 48% supported further development to attract investment, jobs and economic growth.