Submitted by Bill Fernie
6th July 2026
The Scottish Government's latest Economic Bulletin paints a picture of an economy that is continuing to grow—but only just.
While Scotland has avoided recession, growth remains weak and businesses and households continue to face pressures from higher costs, global uncertainty and subdued consumer confidence. The report also highlights how events far beyond Scotland's borders, particularly tensions in the Middle East and energy markets, continue to influence the Scottish economy.
A summary of the key findings.
Overall Economic Picture
The Scottish economy remains in positive territory, but only marginally.
Gross Domestic Product (GDP) increased by just 0.1% over the three months to April 2026. While this represents continued growth, it is well below the pace many economists would hope to see.
Business surveys suggest demand remains weak, with companies reporting fewer new orders and consumers remaining cautious with their spending.
The report notes that although global oil and gas prices eased towards the end of June following improvements in international relations, the earlier surge in energy prices continues to affect businesses and households.
Output and Economic Growth
The economy continues to be supported mainly by the service sector.
Growth came from:
Services
Construction
However, manufacturing and wider production industries continued to struggle.
Construction showed encouraging signs of recovery after a difficult period earlier in the year, while retail activity helped support services.
Some sectors continued to face significant challenges, including:
Accommodation and food services
Professional and scientific services
Financial services
Manufacturing
Overall, growth remains uneven across different industries.
Inflation and Cost of Living
Although inflation has eased considerably from its post-pandemic highs, cost-of-living pressures remain.
Consumer inflation remained around 2.8%, helped partly by lower domestic energy bills following changes to the Energy Price Cap.
However, motorists and businesses continue to experience higher fuel costs, while many companies are still paying more for raw materials and transportation.
The Bank of England expects inflation to increase again later in the year as higher business costs continue feeding through to consumers.
For many households this means that although inflation is much lower than it was two years ago, prices themselves remain significantly higher than before.
Business Conditions
Scottish businesses continue to face difficult trading conditions.
Business activity weakened during May as demand softened further.
Companies identified several major concerns:
Weak customer demand.
Rising energy prices.
Inflation.
Higher transport costs.
Labour costs.
Producer prices increased sharply, reflecting higher costs faced by manufacturers.
Many businesses have absorbed some of these increases rather than passing them fully to customers, placing pressure on profit margins.
The report also notes that although energy prices eased during June, uncertainty remains high.
Labour Market
Scotland's labour market has weakened compared with last year.
The unemployment rate has risen modestly while the number of employees on payrolls has fallen.
Despite this, wages continue to grow.
Average earnings increased by over 5% during the year, meaning that after inflation many workers are still seeing real wage growth.
This provides some support for household spending, although rising living costs continue to offset part of those gains.
[b]Consumer Confidence[/]b
Consumers remain cautious.
Although confidence improved slightly during May, most households remain pessimistic about:
Their current financial position.
Future spending.
The wider economy.
The Scottish Consumer Sentiment Indicator improved to its highest level for three months but remained below zero, indicating that pessimism still outweighs optimism.
Many households continue to prioritise essential spending over discretionary purchases.
[b]Economic Outlook[/]b
The bulletin suggests there are reasons for cautious optimism.
Oil and gas prices have fallen back from recent highs, easing some pressure on businesses and consumers.
If international energy markets remain stable, inflation should gradually moderate and business confidence could improve.
However, the report stresses that considerable uncertainty remains.
Future economic performance will depend on:
Energy markets.
International political developments.
Consumer confidence.
Business investment.
Inflation.
Interest rates.
What Does This Mean for Ordinary Scots?
For most people, the economy is not in crisis—but neither is it booming.
Many households are still adapting to:
Higher food prices.
Higher insurance costs.
Increased mortgage or rental payments.
Expensive energy bills.
Rising transport costs.
While wages are growing, many families still feel financially stretched because prices remain much higher than they were before the inflation surge of recent years.
Businesses face a similar challenge. Costs remain elevated while customers are becoming more careful about spending.
The July 2026 Scottish Economic Bulletin presents a picture of resilience rather than rapid recovery.
Scotland continues to grow, but only slowly. Businesses remain cautious, consumers are still under financial pressure and global events continue to influence domestic economic conditions.
There are encouraging signs, particularly the easing of global energy prices and continued wage growth, but the recovery remains fragile.
The coming months will largely depend on whether inflation continues to fall, consumer confidence improves and businesses regain the confidence to invest and expand.
For now, Scotland's economy appears to be moving forward—but only at a very measured pace.
Read the full bulleting HERE