Scottish firms are bracing up for major obstacles in 2025 as the unpredictability hovers around the global economy, especially by the heightened trade disputes and recession concerns. According to a new study by The Conference Board, geopolitical risks are the top concern for CEOs throughout the world, with trade tensions between the US, EU, and China ranking highest. This sentiment is particularly relevant to Scotland’s corporate environment, where economic growth depends heavily on international trade.
The survey indicates that 46% of CEOs globally view a potential recession as a high-impact concern for 2025, a slight decrease from 53% in 2024. However, the overarching fear of trade wars poses an even greater threat. In Scotland, where the economy is heavily dependent on exports, any escalation in trade tensions could disrupt supply chains and lead to increased costs for businesses. The Scottish economy is characterized as small and open, making it particularly vulnerable to changes in international trade policies. Scottish Enterprise has noted that trade is a vital driver of sustainable economic growth in Scotland. As global competition intensifies, local businesses may face challenges in maintaining their market positions. The potential for higher tariffs and stricter trade regulations could lead to increased operational costs and reduced profit margins for Scottish firms.
Economic Slowdown: Local Implications
The fear of an economic downturn is not just a global concern but also resonates within Scotland’s borders. Recent reports indicate that business activity in Scotland has continued to grow, albeit at a slower pace. The RBS Growth Tracker revealed that while there was positive growth throughout 2024, the rate of expansion has eased significantly as we enter 2025. A decline in new business orders and a notable drop in business optimism signal a cautious outlook among Scottish firms. In January 2025, the Business Insights and Conditions Survey (BICS) highlighted that falling demand for goods and services remains the leading concern among Scottish businesses. This trend aligns with global sentiments expressed by CEOs who fear that an economic slowdown could dampen consumer spending and investment.
In response to these challenges, many Scottish businesses are taking proactive measures to strengthen their supply chains. The survey indicates that 71% of US CEOs plan to alter their supply chains over the next three to five years due to these geopolitical concerns. Similarly, European CEOs are also prioritizing changes, with 77% indicating plans to adapt their supply chains. For Scottish companies, this shift may involve diversifying suppliers and adopting digital technologies to enhance supply chain resilience. With concerns about potential disruptions from trade wars and economic downturns looming large, businesses are increasingly focused on risk mitigation strategies. These changes are essential for maintaining competitiveness in an uncertain global market.
AI: A Double-Edged Sword
Amid these challenges, the integration of artificial intelligence (AI) presents both opportunities and hurdles for Scottish businesses. While AI has been recognized for enhancing workforce productivity—44% of CEOs globally cited this benefit—many companies struggle with its implementation due to a lack of skilled talent. In Scotland, where businesses are already facing labour shortages in various sectors, this challenge could hinder the effective adoption of AI technologies. The ability to leverage AI effectively can provide Scottish firms with a competitive edge by improving operational efficiency and customer satisfaction. However, without addressing the talent gap, many businesses may find themselves unable to fully harness the potential of AI.
Environmental Concerns
As extreme weather events become more frequent due to climate change, environmental sustainability has emerged as a critical focus area for CEOs globally. In Scotland, where renewable energy initiatives are gaining momentum, businesses must navigate the complexities of environmental sustainability while addressing immediate economic concerns. The survey reveals that 34% of CEOs cite climate events as a top factor impacting business operations. For Scottish companies aiming to align with environmental goals while remaining profitable, this presents a dual challenge—balancing sustainability initiatives with the need for economic stability.
Interestingly, despite the looming threats of recession and trade wars, many Scottish businesses are not looking to raise prices significantly in 2025. Instead, there is a strong emphasis on innovation as a key strategy for profit growth. According to global CEO sentiments, innovation ranks as the top priority for increasing profits (37%), followed by introducing new products/services (29%) and investing in technology (26%). This focus on innovation aligns well with Scotland’s strengths in research and development across various sectors. By prioritising technological advancements and product development over price increases, Scottish firms can potentially navigate economic uncertainties more effectively while positioning themselves for long-term growth.
Charting a Path Forward
As Scottish businesses face an uncertain landscape shaped by global trade tensions and recession fears, strategic foresight will be crucial for navigating these challenges. By adapting supply chains, embracing technological advancements like AI, prioritizing innovation over price hikes, and addressing environmental concerns proactively, companies can position themselves for resilience amid geopolitical upheaval.
While the forecast for 2025 presents significant risks for Scottish businesses—ranging from trade wars to economic slowdowns—there also lies an opportunity for growth through innovation and strategic adaptation. As they chart their paths forward in this complex environment, collaboration between government bodies like Scottish Enterprise and local businesses will be essential in fostering an agile economy capable of thriving amidst uncertainty.
