Scottish businesses ‘pessimistic’ about growth outlook

Scottish businesses have become “markedly more pessimistic” about their future economic outlook according to recently published research. 

The research, published by the University of Strathclyde’s Fraser of Allander Institute (FAI), shows that no respondents to the Small Business Monitor survey expected “very strong growth” in the Scottish economy in the next 12 months. 

Despite the poor feedback, the FAI has increased its 2025 growth forecast from 0.8 per cent to one per cent, but say the rise is “nothing to write home about” due to last year’s poor growth statistics.  

“Scotland’s economy continues to face a fragile recovery, held back by uncertainty and data gaps that make it harder to target the right policy responses,” said Professor Mairi Spowage, Director of the FAI. “Restoring business confidence and improving the quality of economic evidence must be central to future decision-making.” 

The report highlights that four out of five Scottish firms are expecting weak to very weak economic growth next year, with only 1.5 per cent of firms expecting strong growth. The survey had over 200 participants from across Scotland, where respondents were asked a range of questions from net zero policy to the Scottish Government and their current business activity.  

Over 78 per cent of respondents to the survey said they are experiencing higher business costs in this quarter, with 80 per cent of respondents expecting this to continue into the next six months. This has fuelled a deep sense of uncertainty in Scotland, as businesses are more concerned about economic and political turmoil than traditional concerns surrounding staff and credit availability. 

The picture around Scottish business growth is further complicated by a lack of reliable activity statistics, say the FAI. Between October 2023 and February 2024, the Office for National Statistics suspended its Labour Force Survey due to a low response rate. Although it is now resumed, participation has dropped to 40 per cent below pre-pandemic levels, leaving areas of the workforce and population unaccounted for.  

Analysis by researchers at the Scottish Health Equity Research Unit say that official data from the ONS could be creating a blurry picture for employment and inactivity in Scotland, where actual employment numbers could be lower than government statistics say. This lack of clarity around employment figures leaves policymakers in the dark when legislating, potentially leading to increased uncertainty in the labour market.  

“Reliable data is the foundation of good policymaking, but right now Scotland’s labour market picture is blurred,” said Emma Congreve, co-director of the Scottish Health Equity Research Unit. “We are urging policymakers to interpret headline statistics with caution and to recognise that key labour market challenges could be more persistent than current data suggests.”