Kate Forbes: 'There is no shortage of issues causing concern for Scottish businesses right now'

Scotland’s economy has shown tentative signs of recovery, with forecasts from the Scottish Fiscal Commission predicting GDP growth of 1.5 per cent in 2025 and 1.6 per cent in 2026. 

Kate Forbes, who held the finance and economy brief between February 2020 and March 2023, before a period away from the government frontbenches while Humza Yousaf served as first minister, is now back as deputy first minister and is charged with growing Scotland’s economy.  

The last five years have been challenging, the pandemic and the recovery followed by war and inflation, resulting in a cost-of-living crisis and rising energy costs have affected millions of Scots. 

Yet Forbes says the Scottish economy has been “resilient against the headwinds”, as last year’s modest growth figures showed that despite a contraction in November, onshore GDP – excluding oil and gas – grew by 1.2 per cent, outpacing the UK’s growth of 0.9 per cent. 

While some of those challenges have eased off, Forbes is worried about Donald Trump’s tariffs, which are now going through the US appeal courts after a US federal court ruled Trump had overstepped a 1977 federal economic emergency law he used to enact them, and how they will affect the confidence of Scottish businesses.  

“There is no shortage of issues causing concern for Scottish businesses right now. You have the impact of tariffs and the uncertainty they bring, bearing in mind what the president [Trump] has announced could change,” she says. 

“And for a small island nation that relies on exports for much of its economic prosperity, it is challenging.” 

She is also worried about the impact of the UK Government’s decision to raise employers’ National Insurance contributions and changes to allowances for family-owned businesses and farms and how that has affected economic growth.

“It has had a big impact on the economy”, Forbes says. “It’s not just about the direct policy impact, it’s about the uncertainty it creates for businesses, which is the biggest limitation of growth.”

But the economy secretary is hopeful that some of the challenges of exporting into the EU single market will be alleviated by the food and animal deal that the UK Government struck with the EU last month. 

The agreement with the European Union was met with mixed feelings by Forbes and members of her party. She welcomed closer cooperation in areas such as agriculture, food and drink, energy and Erasmus, but was scathing of the decision to allow EU fishing vessels access to UK waters until 2038.  

With fishing only accounting for 0.2 per cent of Scotland’s GDP, I ask if she can see the merit in sacrificing joint access to Scotland’s waters to allow other areas of the economy which contribute more to the opportunity to grow quicker via this deal.  

“No. I don’t operate on a basis of national statistics that mask local issues,” she says. “The UK economy essentially depends on London and the south east doing well and that is a completely unsustainable model. It masks much of the deprivation and has a knock-on effect of increasing poverty, and sucks in the talent and opportunities to one location to the detriment of the UK.” 

Her vision for Scotland hinges on “all the component parts prospering”, and while fishing accounts for a low percentage of the overall Scottish GDP it is “massive for the success of the rural north west coast”, which she points out is forecast to see double-digit decreases in population share over the next 40 years.  

In 2021, the Scottish Government committed over £1.9bn towards Scotland’s City, Region, and Growth Deals, a partnership with the UK Government and local authorities aimed at stimulating economic growth across different regions. 

Every local authority is covered in the deal, and it includes projects to upgrade road connectivity in the Highlands and improve skills development and innovation, as well as to improve transport infrastructure across Dundee, Perth, Angus, and North East Fife, and to develop sustainable energy and manufacturing jobs at the no longer operational Grangemouth oil refinery site.  

And while every region has different needs, there are problems that need to be addressed nationwide, such as “the need for affordable housing, transport, and education, communal and leisure facilities”, says Forbes.  

Last month she announced a new deal worth £21.5m that will bring 24 disused or derelict sites and buildings into use across the country and create more than 160 jobs. 

“In Edinburgh, for example, Powderhall used to be a waste management site but now it sits empty at a time when we need houses. So that funding will be used to support a facility for arts and culture, and it will deliver up to 400 new affordable units, as well as a communal facility.  

“That goes right to the heart of how you build a nation’s prosperity from community up, rather than just looking at what our most successful sectors are and picking them to the determinant of local communities.” 

I ask Forbes if she thinks most Scots feel better off than at any other point in their life. Based on income, she doesn’t think so and says “the figures are quite stark” and show that “wages have stagnated”.  

“They have not kept pace with the cost of living, and that means that the previous generation essentially saw their wages continuing to increase, certainly in line with the cost of living. 

“It’s harder [now] to afford the necessities of life, never mind the extras that you may have saved for in the past.” 

Forbes argues that the stagnation “feeds into a lot of political apathy, disenfranchisement, and anger that you see in the country just now”.  
“People feel left behind,” and she says there are three areas that need to change to bring people back onside.  

She describes the “knock-on effect” of Brexit and subsequent trade barriers as one of the main reasons for energy bills increasing and says extra checks and overall higher cost of transportation must be addressed. 

Supporting people into well-paid, secure employment is another step she would like to take. But while the Scottish Government was an early supporter of the real living wage and set up the Scottish Business Pledge – a voluntary commitment made by businesses to adopt progressive practices like paying the real living wage and not using zero-hours contracts – the government “can’t enforce that”. 

She comes back to the need for higher growth. “I don’t need to tell you that growth over the last few years has not in any way been comparable to other small, advanced economies.

“Improving those three areas is crucial to how we deal with flatlining wages and rising costs.”