WITH the Budget less than a week away, Scottish companies are still

clinging to hopes of a slow but steady economic recovery while bracing

themselves for bad news from the Chancellor.

A wide-ranging survey of almost 200 leading firms found that

three-quarters were concerned that Tuesday's Budget measures would

adversely affect them, a figure that rose to 82% in the west of

Scotland.

However when asked if they felt that business confidence was

returning, 77% agreed, virtually all describing the process as ''slow''.

Only one in five disagreed.

The fragility of this confidence is highlighted by mixed responses to

another question which showed 41% viewing prospects for the next year

''with some concern'' and 7% downright pessimistic. 41% were optimistic.

Carried out in the three weeks to November 12, the poll was prepared

by Market Research Scotland for accountants Pannell Kerr Forster, The

Herald, and the BBC.

The results would appear to confirm a trend, detected by other recent

Herald polls and industry surveys, that Scottish business confidence is

beginning to wane after strong showings earlier this year.

The deepening recession in Europe, Scotland's most important export

market, has been cited as one of the main reasons. It was notable that

the introduction of tax incentives for exports was the most popular of a

range of suggested Government measures.

Extending the spread of VAT proved the next most popular, attracting

52% support while increased personal income tax scored 46%, higher VAT

rate (45%), abolishing mortgage relief (44%).

The controversial proposals to extend VAT to domestic fuel was

supported by only 43% of executives, one of quite a number of disturbing

results for the Government.

Almost two-thirds did not believe that the Government's economic

policy was benefitting business with discontent again highest in the

west where 71% were unhappy. Just over one-quarter favoured the policy,

a figure that rose to one-third in the east.

Concerns over the underlying strength of the recovery will hardly be

allayed by the finding that while 29% of companies expected to increase

their workforce, virtually the same proportion thought they would have

to cut staff numbers. 43% predicted no change.

The high level of unemployment was clearly worrying many businessmen,

according to the poll which showed overwhelming support for a slightly

higher level of inflation if that was needed to create more jobs.

Almost half the respondents favoured a combination of 4% -- 5%

inflation and unemployment below three million against 19% who preferred

a rate of no more than 3% with a consequent jobless total of more than

three million.

Asked if they favoured Government intervention to stop local jobs

being transferred to other countries, just under one-half said yes

against 39% who opposed it. Support was strongest among bigger

companies.

As in most of the specific questions, retailers came out as the most

upbeat as the Government banks on consumers to spend their way out of

the recession while the hard-pressed construction industry was the least

optimistic.

Fully one-quarter of the building companies polled said they did not

believe confidence was returning -- quickly, slowly, or at any other

speed -- and 60% viewed the next 12 months with some concern.

Not surprisingly, the construction trade is also the most concerned

about spending cuts with 71% saying they would be adversely affected

against only 42% of the retailers.

By regional breakdown, the north and east consistently scored higher

in the ''feel-good'' scale than the west where one quarter of the

companies reported no sign of any return in business confidence compared

with 21% overall.

The much-criticised local enterprise companies can take some comfort

from the finding that 54% of the executives questioned agreed that they

and Scottish Enterprise National ''added value to the economy''.

Just over one-fifth disagreed and 24% said they did not know, the

latter suggesting a communications problem somewhere along the line. Of

the regions, the north was the most in favour of the lecs while, perhaps

surprisingly, bigger companies (68%) shared its enthusiasm for

organisations which are geared more towards helping small firms.

Almost half the companies questioned were based in the west against

one-third in the east and 21% in the north. Manufacturing (40%)

dominated, followed by services (27%), construction (23%), and retailers

(10%).