Scottish Business Sentiment Index

Executive Summary

The Scottish Business Sentiment Index (BSI) provides a new comprehensive, real-time measure of business confidence in Scotland by analysing sentiment in news articles related to corporate and industrial developments. Constructed using data from Factiva (a global news database), the BSI systematically tracks sentiment shifts by applying machine learning and linguistic analysis techniques to a vast corpus of business news from national and regional newspapers.

The BSI serves as a valuable complement to traditional sentiment measures, such as survey-based consumer confidence indices. By leveraging real-time news coverage, the index offers a dynamic perspective on business sentiment, allowing for timely assessments of economic conditions. The index is validated through comparisons with macroeconomic indicators like GDP and employment levels, confirming its reliability as an economic barometer and as leading or early warning indicator. Additionally, its responsiveness to key economic events, including the Great Financial Crisis, Brexit, and the COVID-19 pandemic, highlights its effectiveness in capturing sentiment fluctuations in response to major shocks.

Future enhancements, including increased geographic coverage, higher-frequency updates, and expanded data sources, could further refine its predictive capabilities and establish the BSI’s role as a key tool for policymakers, economic analysts, and business leaders in monitoring and forecasting economic trends in Scotland.