Navigating Economic Growth and Business Dynamics in Scotland: Insights from September 2025

Scottish Economy Shows Resilience Amidst Global Headwinds

Edinburgh,Scotland – Scotland’s economic performance is displaying a pattern of moderate expansion,according to the latest insights released today. While growth continues, the pace has slowed in recent months, mirroring trends observed across the united Kingdom.

Economic Performance: A Mixed Picture

The Scottish economy expanded by 1.2% in 2024 and has achieved 0.5% growth through the first half of 2025. However, the rate of increase diminished from 0.4% in the first quarter of 2025 to 0.2% in the second quarter. This slowdown echoes a similar trend at the UK level, where growth registered at 0.7% in Q1 and 0.3% in Q2 of this year.

Strengthening performances in the services and construction industries are fueling growth, effectively offsetting a downturn in the production sector. Specifically, professional, scientific, and technical services, alongside accommodation and food services, have shown considerable improvements. Construction activity has also reached its strongest level in over two years.

Manufacturing Challenges and Tariff Impacts

The primary drag on scotland’s economic expansion has been the production sector,experiencing a 2.3% output decline in the second quarter of 2025. manufacturing is largely responsible for this contraction. Several factors are contributing to this, including the closure of oil refining operations at Grangemouth and the impact of increasing tariffs imposed by the United States.

Recent surveys indicate that nearly 33% of Scottish manufacturing businesses have been negatively affected by US tariffs,with 17.2% reporting increased costs, 13.2% facing reduced demand, and 10% experiencing supply chain disruptions.

Impact of US Tariffs (July 2025)	Percentage of Affected businesses
Additional Costs	17.2%
Reduced Demand	13.2%
Supply Chain Disruption	10%

Business Sentiment and Rising Costs

Business surveys reveal that economic uncertainty, coupled with weaker demand and persistent cost pressures, have dampened overall sentiment in the first half of 2025, a trend continuing into the current quarter. The Royal Bank of Scotland Growth Tracker shows business activity has stabilized but is generally weakening since the end of last year, registering a score of 50.3 in August.

New business orders have been in negative territory for eleven consecutive months. Despite some moderation in concerns about taxation, inflation, and energy prices, falling demand for goods and services remains the top concern for businesses, cited by 18.8% of respondents.

A substantial 83% of businesses have experienced rising total business costs in the recent past or anticipate increases in the coming months. Labor costs are a key driver of these pressures,with over 31% of businesses factoring them into potential price increases. employer National Insurance Contributions, which rose in April, are contributing to the pressure.

The Rise of Artificial Intelligence

Interestingly,adoption of Artificial Intelligence (AI) technologies among Scottish businesses is steadily increasing. Currently, 25.5% of businesses report utilizing AI, a rise from 14.0% in September 2023. Larger firms are leading the charge, with 38.4% reporting AI usage compared to 24.1% of smaller businesses.

The Details and Communication sector exhibits the highest adoption rate at 48.5%, while sectors like Construction (20.1%) and Transport and Storage (24.1%) lag behind. Most businesses are implementing AI through third-party software, highlighting the need for specialized skills and accessible solutions.

Did you know? Almost half of Scottish businesses are now using AI to improve operational efficiency.

The primary motivation for AI adoption is to enhance business operations (49.0%), with fewer businesses focusing on personalized customer experiences or new product advancement. Businesses are leveraging AI to improve efficiency rather than outright replace employees.

Looking Ahead

The Scottish economy is navigating a complex landscape.While some sectors demonstrate strong performance, broader economic headwinds and increasing costs present ongoing challenges. The uptake of AI suggests a commitment to innovation and efficiency, but wider adoption relies on addressing skills gaps and facilitating access to AI solutions.Continued monitoring of global economic conditions and policy responses will be critical for sustained growth.

pro Tip: Businesses should consider investing in employee training related to AI technologies to maximize thier potential benefits.

Frequently Asked Questions

• What is the current growth rate of the scottish economy? The Scottish economy grew 0.5% in the first half of 2025, but the pace is slowing.
• What sector is most impacting Scotland’s economic growth? The production sector is currently dragging on growth, particularly manufacturing.
• How are US tariffs affecting Scottish businesses? Approximately 33% of Scottish manufacturing businesses report being negatively impacted by US tariffs.
• What is the adoption rate of AI in Scotland? 25.5% of scottish businesses are currently using Artificial Intelligence technologies.
• What is the biggest concern for Scottish businesses right now? Falling demand for goods and services is currently the leading concern for Scottish businesses.
• are Scottish businesses optimistic about the future? Business Optimism has leveled off and remains lower year on year.
• What is driving up business costs in Scotland? Labour costs and rising employer National Insurance Contributions are major contributors to increasing business costs.

What do you think will be the biggest challenge facing Scottish businesses in the next year? Share your thoughts in the comments below!

What are the key economic indicators suggesting the overall health of Scotland’s economy as of September 2025?

scotland’s Current Economic Landscape (September 2025)

Scotland’s economy in late 2025 presents a mixed picture. While overall GDP growth is projected at 1.2% – a slight uptick from 2024’s 0.9% – regional disparities remain notable. Key sectors driving growth include renewable energy, life sciences, and a resurgent tourism industry. However,challenges persist with inflation (currently at 3.8%),skills shortages,and the ongoing impact of Brexit on trade with the EU. The focus for businesses now is adaptation and strategic investment. Understanding these economic indicators is crucial for informed decision-making.

Sector-Specific performance & Opportunities

Here’s a breakdown of key sectors and their current dynamics:

* Renewable Energy: Scotland continues to be a leader in renewable energy, particularly wind and hydro power. Government incentives and private investment are fueling expansion, creating opportunities in manufacturing, installation, and maintainance. Green energy jobs are experiencing ample growth.

* Life Sciences: The life sciences sector, centered around hubs like Edinburgh and Glasgow, is thriving. Research and progress, particularly in biotechnology and pharmaceuticals, are attracting significant funding. Biotech innovation is a key driver.

* Tourism: Post-pandemic, tourism has rebounded strongly, with visitor numbers exceeding pre-2020 levels. Focus is shifting towards enduring tourism and attracting high-value visitors. Scottish tourism recovery is a positive sign.

* financial Services: Edinburgh remains a major financial center, but faces increasing competition from London and other European cities. Fintech and digital banking are areas of growth. Fintech Scotland initiatives are gaining traction.

* Manufacturing: While facing global supply chain challenges, Scottish manufacturing is adapting through automation and diversification. Focus on high-value, niche products is proving prosperous. Advanced manufacturing Scotland is a key area for investment.

The Impact of Brexit & Trade Dynamics

Brexit continues to shape Scotland’s economic landscape. While the UK-EU Trade and Cooperation agreement is in place, non-tariff barriers and increased bureaucracy have impacted trade flows.

* Export Challenges: Scottish businesses exporting to the EU are facing increased costs and delays. Diversification of export markets – focusing on North America, Asia, and the Commonwealth – is becoming increasingly significant. Scottish exports are adapting to new realities.

* Supply Chain Disruptions: Brexit has exacerbated existing supply chain issues, leading to higher input costs and production delays. Businesses are exploring nearshoring and reshoring options. Supply chain resilience is a priority.

* Labor Shortages: Restrictions on the free movement of labour have contributed to skills shortages in key sectors,particularly hospitality,agriculture,and healthcare. Scottish labour market challenges require innovative solutions.

Regional Economic Variations

Economic performance varies significantly across Scotland’s regions:

* Edinburgh & Lothians: Strong performance driven by financial services, tourism, and technology.High levels of investment and a skilled workforce.

* Glasgow & Clyde Valley: Diversified economy with strengths in manufacturing, life sciences, and creative industries.Ongoing regeneration efforts are attracting investment.

* Highlands & Islands: Reliance on tourism, agriculture, and fishing. Facing challenges related to depopulation and infrastructure. Highlands and Islands enterprise plays a crucial role.

* Aberdeen & North East: Historically dependent on the oil and gas industry, now undergoing diversification towards renewable energy and technology. Aberdeen energy transition is a major focus.

* Scottish Borders: Focus on tourism, agriculture, and manufacturing. Opportunities for growth in renewable energy and digital technologies.

Business Dynamics: key Trends in September 2025

Several key trends are shaping business dynamics in Scotland:

1. Digital Change: Businesses are accelerating their digital transformation efforts to improve efficiency,enhance customer experience,and compete effectively. Digital adoption Scotland is a national priority.
2. Sustainability & ESG: Environmental, Social, and Governance (ESG) factors are becoming increasingly important to investors, customers, and employees. Businesses are adopting sustainable practices and reporting on their ESG performance.Sustainable business Scotland is gaining momentum.
3. Remote & Hybrid work: The shift towards remote and hybrid work models is reshaping the labour market and impacting commercial property demand. Future of work Scotland is a key discussion point.
4. Skills Development & Training: Addressing skills shortages is a critical priority.Businesses are investing in training and development programs to upskill and reskill their workforce. Skills Scotland initiatives are vital.
5. Innovation & R&D: Investing in research and development is essential for driving economic growth and competitiveness. Government funding and private investment are supporting innovation in key sectors. scottish innovation ecosystem is flourishing.

Funding & Support for scottish Businesses

A range of funding and support programs are available to Scottish businesses:

* Scottish Enterprise: Provides financial assistance, business advice, and support for growth.

* Highlands and Islands Enterprise: Supports businesses in the Highlands and Islands region.

* Scottish Development International: Promotes Scotland as a business location and supports international trade.

* Regional Selective Assistance: Offers