Latest Royal Bank Growth Report Shows A Mixed Picture

8th July 2025

The latest Royal Bank of Scotland UK Regional Growth Tracker shows a mixed picture of economic momentum across the country as of July 2025:

Regional Highlights

London and the North East continue to lead growth, with business activity indices above 50, signaling expansion.

Wales and the South West also posted modest gains.

Northern Ireland recorded the steepest decline in business activity, slipping into contraction territory.

Business Activity Index (January 2025 snapshot) Here's how regions ranked by monthly growth (index >50 = growth):

Region Index Score Status
London 54.8 Strong growth
North East 53.1 Growth
Wales 50.7 Marginal growth
South West 50.2 Marginal growth
East Midlands 49.8 Slight decline
Scotland 49.6 Slight decline
Northern Ireland 45.0 Sharp decline

Employment Trends

Northern Ireland remains the most resilient labour market, with 25 consecutive months of job creation.

Most other regions saw employment fall, especially in the West Midlands and East of England.

Inflation & Cost Pressures

Businesses across all regions reported rising input costs, especially in the North East.

Price pressures are being driven by wages, energy costs, and national insurance contributions.

Outlook & Sentiment

Firms in London and the West Midlands are the most optimistic about future growth.

Confidence dipped in Northern Ireland, hitting a two-year low.

How Scotland compares to other regions
How does Scotland stack up against other UK regions in terms of economic growth, employment, and investment as of mid-2025:

Growth Performance: Lagging Behind the Pack

Scotland's GDP growth forecast for 2025 is 0.8%, slightly below the UK average of 0.9%.

The Fraser of Allander Institute notes Scotland's economy is "essentially the same size in real terms as it was six months ago" due to global uncertainty and Trump-era tariffs.

In contrast, London, the East of England, and Northern Ireland are expected to lead UK growth with 1.6-1.7% GVA annually from 2025-2028.

City-Level Winners and Strugglers

Edinburgh and Glasgow are forecast to outperform the rest of Scotland, with GVA growth of 1.8% and 1.7%, respectively.

Aberdeen, hit by energy sector decline, is expected to grow just 0.9%, the lowest of any UK city.

Employment Trends

Scotland's employment growth is forecast at 0.4%, below the UK average of 0.5%

Some rural and island areas (e.g. Eilean Siar, Argyll and Bute) face declining working-age populations, which could further dampen growth.

Investment & Business Confidence

Rising National Insurance contributions and global trade uncertainty are hurting business sentiment and investment in Scotland.

The Scottish rate of income tax, higher than in other UK regions for many earners, is also cited as a drag on growth

Sectoral Mix Matters

Regions strong in tech, professional services, and communications (like London and Reading) are pulling ahead

Scotland’s reliance on oil and gas and slower-growing sectors is holding back broader recovery.

What Policy Changes Might Help Scotland Close Its Growth Gap

1. Accelerate Infrastructure and Connectivity
Invest in strategic transport corridors and inter-island links to reduce regional isolation and cut business costs.

Expand rail reopenings (e.g. Levenmouth line) and dual carriageway upgrades on the A9 and Aberdeen bypass.

Extend zero-emission ferry and inter-island bus services, building on free youth travel schemes.

Roll out nationwide gigabit broadband and 5G to support remote work, digital start-ups, and rural industries

Leverage transport decarbonisation projects (offshore wind ports, EV charging networks) to create jobs and embed supply chains in Scotland’s low-carbon transition

2. Boost Innovation, Entrepreneurship, and Scale-ups
Fully resource and network "pre-scaler" hubs to shepherd high-potential ventures from prototype to market entry.

Forge strategic international partnerships to connect Scottish clusters with leading ecosystems in North America, Europe, and Asia.

Enhance R&D tax credits and introduce targeted “scale-up vouchers” covering advisory, export readiness, and compliance costs.

3. Reform Skills and Labour Market
Launch sector-specific skills academies—particularly in renewables, life sciences, digital and defence—co-designed by industry and colleges to close talent gaps.

Expand lifelong learning vouchers and portable entitlement accounts so workers can upskill in response to shifting industry demands.

Incentivise inward mobility of specialists through visa facilitation and streamlined professional accreditation.

4. Industrial Strategy for High-Growth Sectors
Develop an ambitious mission-driven industrial policy around offshore wind, tidal and wave energy, hydrogen and battery manufacturing—mirroring Hunter Foundation’s call for transformative green investments.

Embrace defence-sector opportunities—relax non-munitions funding bans to secure a share of UK’s £60 billion+ defence budget and associated supply chains

Offer export finance guarantees and joint Scottish-UK support to help SMEs penetrate new markets, especially in North America and the EU

5. Fiscal and Regulatory Reforms
Introduce a modest cut to the Scottish Rate of Income Tax on middle bands to improve competitiveness, paired with a freeze on thresholds to protect progressivity.

Simplify planning and permit processes—especially for green energy and industrial parks—to shorten project lead times and lower capex hurdles.

Reform non-domestic rates with targeted relief for high-growth digital and manufacturing firms, shifting from property-based to turnover-based levies.

6. Strengthen Governance and Delivery
Establish the promised Economic Leadership Forum to provide ministerial accountability and a clear escalation path for delivery challenges

Mandate transparent annual reporting of NSET actions, funding allocations, and milestone outcomes—linking each programme to defined GVA, productivity, and inclusion targets.

Task the Scottish National Investment Bank with a sharper mission focus—boosting its balance sheet and tying capital deployment to measurable growth corridors (e.g. clean energy, deep-tech).