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Scottish Economic Bulletin Published November 2025
Positive growth and low unemployment, but underlying weakness in business activity and consumer sentiment points to a more subdued outlook as fiscal uncertainty builds ahead of the UK Budget.
The latest Scottish Economic Bulletin highlights how the economy has continued to show resilience into the second half of the year, despite persistent challenges
The Scottish economy has continued to demonstrate resilience into the second half of the year, despite facing persistent challenges. While growth remains positive and unemployment is low, underlying weakness in business activity and consumer sentiment suggests that momentum could remain subdued in the months ahead, particularly in the run‑up to the UK Budget.
Economic growth slowed to 0.2% in the second quarter but rebounded in the three months to August, rising to 0.7% — the strongest pace since May 2024. Services and construction drove this expansion, offsetting declines in production output, especially in manufacturing. However, with output falling in July and August, overall third‑quarter growth is expected to be weaker than the latest three‑month figures suggest.
Business surveys indicate that activity and new orders contracted during the third quarter, reflecting weaker domestic demand. Consumer confidence also remains fragile, with the Scottish Consumer Sentiment Indicator at ‑8.1 in September, down 2.4 points since the start of the year. Concerns over household financial security and spending continue to weigh heavily on sentiment.
Inflation rose to 3.8% in September, though this was below expectations and is judged by the Bank of England to have peaked. Fiscal uncertainty ahead of the UK Budget, including potential tax changes, has added to caution among businesses and households, with weak demand emerging as the primary concern in recent months.
Scotland’s unemployment rate remains low at 3.7%, though the UK rate has risen to 5%. Payrolled employees in Scotland fell by 15,500 (0.6%) over the past year, signalling a softening labour market. Earnings growth has also slowed, though easing interest rates have begun to improve financial conditions.
Business optimism has held up through much of the year but softened heading into the fourth quarter, according to the Growth Tracker survey. Forecasts suggest UK growth will ease slightly in 2026, reflecting global economic weakness. The forthcoming OBR forecasts are expected to highlight a weaker outlook and fiscal challenges for the UK Budget.
In a significant development, the Scottish Government announced its first credit rating this month, placing Scotland at parity with the UK. The rating provides an independent assessment of economic and fiscal performance and underpins the government’s business case for future bond issuance.
Read the full bulletin HERE
