Despite recent difficulties, Scotland’s economy is expected to grow moderately in 2025. Several projections indicate that after a reduced growth of about 0.4% in 2024, the economy will increase at a rate of between 1.1% to 1.7% in 2025. A slow recovery from the economic effects of the COVID-19 epidemic and the ensuing inflationary pressures is reflected in this expected improvement.
According to the EY ITEM Club, Scotland’s GDP will expand by 1.3% in 2025, which is just less than the UK average but shows a promising trend after a weak first year. In the meanwhile, the Fraser of Allander Institute projects 1.1% growth, which is in line with previous projections that show the Scottish economy is in a recovery phase5. Consumer spending, which is anticipated to rise by 1.5% a year due to improving consumer confidence and moderate inflation, is anticipated to underpin this expansion.
A rebound in tourism has boosted the services sector, especially lodging and food services, which are expected to be the main drivers of the recovery. But supply chain problems and excessive borrowing rates that have discouraged corporate investment are still problems facing the building industry. Nevertheless, as uncertainty starts to subside, a slight recovery in capital expenditure is anticipated.
While 2025 looks promising, there are still a number of obstacles to overcome. Although it has started to decrease, inflation has remained a problem; according to latest data, consumer price inflation is currently at about 2.2%. Due to economic challenges, only a small percentage of enterprises have stated plans to invest in capital improvements, indicating that high loan rates have impacted corporate confidence and investment plans. The labour market is also cooling, as evidenced by a minor increase in unemployment despite continued challenges with hiring.
Urban areas like Edinburgh and Glasgow are predicted to experience the most economic development, with growth rates of 1.8% and 1.7%, respectively. This geographical discrepancy emphasises how crucial it is to make calculated investments in services and infrastructure that may stimulate growth in every part of Scotland.
Scotland’s economy is expected to develop moderately in 2025 as sectoral resilience and consumer confidence rebound. Even though issues like inflation and labour market limitations still exist, the general trend indicates that the economy is stabilising, which may pave the way for stronger growth in the years that follow. Maintaining this positive momentum will require continued attention to improving corporate investment and tackling sector-specific issues.
Positive but not positive enough?