Will UK and Scotland gain by being more competitive to combat new Tariffs

3rd April 2025

Both the UK and Scotland stand to gain significantly by harnessing and enhancing their competitive strengths in today's rapidly changing global economy. By leveraging their established sectors and investing in innovation, they can attract inward investment, boost exports, and ultimately drive higher productivity and job creation.

Building on Economic Strengths
Scotland boasts strong sectors such as renewable energy, financial services, and advanced manufacturing.

The Scottish Government's strategies—articulated in plans like Scotland’s National Strategy for Economic Transformation—emphasize growing these competitive sectors and capitalizing on emerging opportunities in areas like the hydrogen economy and net zero technologies.

These initiatives not only align with global sustainability trends but also position Scotland to capture high-value, future-focused investments, translating into increased export revenues and higher living standards .

Inward Investment and Trade Expansion
The UK as a whole, and Scotland in particular, have a reputation as trading nations with a rich history of adapting to international market dynamics.

By maintaining competitive edge—through policies that foster innovation, streamline regulatory frameworks, and support technological adoption—the UK can mitigate challenges (like those arising from tariff adjustments) and continue to attract global investment. For example, strategies detailed in Scotland’s inward investment plan highlight how focusing on competitive sectors (such as software, IT, and financial services) has already resulted in thousands of high-quality jobs and robust investment inflows .

This suggests that competitiveness is a key driver not only for regional growth but also for broader economic resilience.

Long-Term Gains through Strategic Adaptation
Competitiveness encourages both public and private sectors to collaborate on innovation. This includes responding proactively to trade disruptions by investing in digital transformation, superior supply chain management, and strategic market diversification.

The UK’s competitive strategy, particularly if it continues to evolve post-Brexit, can result in increased global market share. As competitive industries expand and diversify, they contribute to overall GDP growth and enhance the country’s position as an influential trading partner. In Scotland’s case, becoming more competitive—whether through a commitment to renewable energy or by re-opening trade channels with the EU—enables the region to secure a leadership position in high-growth sectors .

In essence, by focusing on competitive advantages—specifically innovation, strategic investment, and targeted policy reforms—both the UK and Scotland are well positioned to benefit from global trade opportunities. This strategic direction will likely drive long-term economic growth, higher employment, and increased tax revenues.

When it comes to retail pricing—especially for shops in regions like Caithness and across the UK—the picture isn’t binary, but rather a dynamic mix influenced by several interlocking factors. Let’s break down the key considerations and what they might mean for when we could start seeing noticeable price adjustments:

Factors Driving Future Price Increases
Upstream Cost Pressures

Tariff Transmission: When tariffs increase costs for imported goods, those additional expenses can eventually filter through the supply chain. Suppliers handling imported inputs may raise their prices, and over time, retailers will likely pass on at least part of those costs to the consumer.

Global Supply Dynamics: Besides tariffs, other factors—such as disruptions in global logistics or fluctuations in exchange rates—can also drive up procurement costs. Retailers facing rising wholesale prices for imported or even some domestic products may adjust their prices accordingly.

Retailer Strategy and Competitive Pressure

Absorbing Costs vs. Price Pass-Through: Many retailers, particularly in highly competitive local markets, might initially absorb some cost increases to avoid alienating customers. This delay means that even if supplier costs rise immediately, retail prices might remain steady for a season.

Timing and Inventory Cycle: Many shops cycle their inventory seasonally. For instance, if tariffs impact the cost of new shipments, you might see price increases occur when older, lower-cost inventory is exhausted and new stock is introduced—often aligning with seasonal transitions (for example, early autumn).

Product Category Variability

Non-Food Items: Data from earlier reports in similar circumstances have shown that non-food items can sometimes experience deflation or very modest inflation, thanks in part to aggressive discounting strategies. However, if new costs persist, these items may begin to see gradual price increases—potentially over the next one to three quarters.

Food Items: Since many food products are sourced locally, the immediate impact might be muted. Yet, those components still dependent on imported inputs could see a price rise. In practice, any adjustment here is likely to be incremental and may become noticeable later in the year if cost pressures continue.

When Can We Expect Changes?
While it’s hard to pinpoint exactly when retail prices will begin to rise noticeably, here are some informed insights:

Short-Term (Next 3 Months): In many cases, retailers prefer to stabilize prices for a season. You might not see dramatic changes immediately as companies attempt to gauge how persistent the cost increases are.

Medium-Term (3-6 Months): If suppliers consistently adjust their prices upward and if global or domestic inflationary trends continue, incremental increases in retail pricing could start to be evident—particularly as new inventory cycles begin.

Seasonal Adjustments: Price hikes might also align with key restocking periods. For many retailers, this could mean adjustments around seasonal transitions (for example, the post-summer period or the onset of autumn).

Broader Context in the UK and Scotland
In a competitive environment such as the UK and Scotland, local market conditions—like strong local sourcing networks and community-based retail strategies—can help moderate the pace of price increases. Additionally:

Local Sourcing: Regions with robust local supply networks (like many parts of Scotland) might face less pressure compared to those that rely heavily on imports.

Innovative Business Models: Retailers employing digital inventory tools and dynamic pricing strategies may adjust prices more responsively, helping both to keep cost increases at bay and to maintain customer loyalty.

In summary, while we might not see a sudden, sweeping increase in shop prices next month, the cumulative effects of rising supplier costs, global inflationary pressures, and inventory restocking cycles suggest that some segments of the retail market—particularly for imported or non-food items—could start experiencing gradual price increases over the next three to six months. The timing will also depend on regional factors and how quickly retailers decide to adjust their pricing models in response to these cost pressures.