Scottish economic bulletin - June 2025

14th June 2025

Scottish economic growth picked-up in the first quarter of 2025 following a weak end to 2024. However businesses remain concerned about weakening demand and a further fall in consumer sentiment in April highlights the risk that rising global economic uncertainty translates into weaker domestic spending.

Scottish GDP grew 0.4% in the first quarter of 2025, picking up from 0.1% growth in the final quarter of 2024. Growth over the quarter was driven by the Services and Production sectors which offset flat growth in Construction. This pattern of stronger growth has also been seen at a UK level with growth of 0.7% over the quarter.

In the near term, latest business survey data indicates a slight improvement in business activity into the second quarter. The RBS Growth Tracker reported that business activity in May increased for the first time in six months, albeit the pick-up was marginal and indicators of new business orders remain slightly in negative territory. This reflects that while activity and output have improved, weakening demand remains a key concern for business and the recent fall in consumer sentiment in April to its lowest level in two years further underlines this risk.

The recent fall in sentiment likely reflects a range of domestic and global factors, which continue to weigh negatively on consumer confidence regarding the economy and household finances. Labour market indicators remain robust, however, with unemployment at 4.2%, although the fall in the number of payrolled employees over the past year does indicate a degree of loosening over this period. Weaker labour demand has also been indicated by business survey data in recent months, however the most recent data indicates a broader stabilisation in that regard.

Furthermore earnings growth remained robust in May with PAYE earnings rising 5.3% in nominal terms over the year. The pick up in inflation during the year to 3.5% in April has meant the pace of real terms earnings growth has eased from last year, though remains positive. The increase in trade tensions has generated increased uncertainty regarding the outlook for inflation with risks in both directions, however expectations of more stable inflation coupled with the lower Bank Rate should continue to help support consumer and business activity.

Looking ahead, the Scottish Fiscal Commission forecast Scottish economic growth to slow to 1.1% in 2025, down from 1.2% in 2024, before rising to 1.8% in 2026 and 1.7% in 2027. This is a more moderate outlook for growth than previously forecast in December, and reflects the recent pattern of downward revisions to UK and global growth forecasts, as the economy adjusts to the sharp increase in global economic trade uncertainty.

Read the full report HERE