Business confidence in Scotland has surged in July, driven by increased optimism in both business prospects and the economy, according to a report.

The latest Bank of Scotland business barometer shows business confidence has increased eight points to 51% during the month.

Companies reported higher confidence in their business prospects month-on-month, up one point at 45%, with their optimism in the economy also up 15 points to 57%.

A net balance of 47% of businesses in the country also expect to increase staff levels over the next year, up four points on last month.

Looking ahead to the next six months, Scottish businesses identified their top target areas for growth as investing in their teams.

The business barometer, which surveys 1,200 businesses monthly, provides early signals about UK economic trends both regionally and nationally.

Martyn Kendrick, Scotland director at Bank of Scotland commercial banking, said: “It’s fantastic to see Scottish business confidence rising again, and staying above the UK average for a second month in a row.

“With the summer in full swing, cities like Edinburgh are readying for a vibrant month ahead. The likes of pubs, shops, and tourist attractions are hoping to benefit from the Fringe and the Edinburgh International Festival, especially as last year saw 2.4 million tickets sold to visitors from more than 170 different countries.

“But this influx of tourists isn’t limited to the capital, with events like the Cowal Gathering, Fringe by the Sea in North Berwick, and the World Pipe Band Championships in Glasgow all playing a part in creating a real a buzz, and new opportunities, across the entire country.”

Paul Gordon, managing director for relationship management at Lloyds Bank business and commercial, said: “We’ve seen business confidence rebound in July, returning to the level we saw in May.

“Businesses may be feeling more resilient about their prospects, which in the long term can help drive innovation and create jobs across the sectors.

“In retail, we’ve seen the highest level of confidence since the pandemic, which is a positive sign for a sector that has faced several challenges in recent years.”

Hann-Ju Ho, senior economist at Lloyds Bank commercial banking, said: “This month shows that businesses are feeling more confident, buoyed by their positive trading prospects and economic outlook.

“Retail-focused businesses were the main driving force behind the positive rise in trading prospects and these results tally with the improvement we have seen in consumer confidence.

“With the data suggesting that businesses may have taken a more cautious approach in June, next month will be one to watch to see if the renewed sense of optimism continues.”