Economy

RESEARCH JUSTIFICATION

Understanding the Scottish Economy is key for studio projects designed to support economic growth. By examining current trends, we can identify the impact of specific industries and services on the national economy and consider how these patterns can influence communities at a local level.

How can economic trends affect local communities?

SCOTLAND'S GLOBAL TRADE NETWORK

IMPORTS AND EXPORTS

SCOTLAND'S GLOBAL TRADE NETWORK

NORTH AMERICA

SCOTLAND'S GLOBAL TRADE NETWORK

SOUTH AMERICA

SCOTLAND'S GLOBAL TRADE NETWORK

EUROPEAN UNION

SCOTLAND'S GLOBAL TRADE NETWORK

EUROPE (EXCLUDING EU)

SCOTLAND'S GLOBAL TRADE NETWORK

MIDDLE EAST AND NORTH AFRICA

SCOTLAND'S GLOBAL TRADE NETWORK

SUB-SAHARAN AFRICA

SCOTLAND'S GLOBAL TRADE NETWORK

ASIA AND OCEANIA

Biggest Exports

Scotland’s economy remains predominantly service-based (Fraser of Allander Institute, 2025, Scottish Government, 2025).

Service Sector: Includes finance, public services, education, tourism, and the creative industries. It contributes around 76% of GDP.

Production Sector: Including manufacturing, energy, and utilities. This accounts for roughly 18% of GDP.

Construction: Is approximately 5–6% of GDP.

Agriculture, Forestry, and Fishing: Together these industries make up just over 1% of GDP.

Although services dominate nationally, industrial and resource-based activity still shapes much of Scotland’s regional identity, particularly in the Highlands, the Northeast, and rural mainland areas. Recent figures show modest service growth offset by contraction in production, linked to fluctuations in oil and gas and wider manufacturing. At the same time, construction and renewable infrastructure investment have become stabilising forces, reflecting a shift toward low-carbon transition and circular resource systems.

This pattern is echoed in Scotland’s export economy, where a few sectors generate most external income. Mineral fuels, mainly oil and gas, remain the largest export at over £9 billion, followed by machinery and transport equipment (~£8 billion dominated by Scotch whisky and seafood, food and drink contributes a further £7 billion  (Scottish Parliament, 2024, Scotland.org, 2024). While these sectors anchor Scotland’s trade profile, they expose risks tied to volatile, carbon-intensive industries. Policy now prioritises diversification into renewable energy manufacturing, digital technology, sustainable timber, and bio-based materials as new export oppertunities. In this sense, Scotland’s economic trajectory reflects a broader national project: rebalancing from extraction and export toward regeneration, innovation, and distributed production, aligning economic resilience with environmental repair. 

Current Economic Climate

Scotland’s economy in late 2025 is showing modest growth at 1.1%, rising to 1.6% in 2026 but remains subdued due to weak investment, persistent cost pressures, and sluggish consumer demand. Inflation has eased slightly but continues to impact household spending and business margins. 

The labour market is relatively stable, though regional and sectoral disparities persist. Public finances face tightening constraints amid rising service demands, while long-term challenges such as productivity growth and private investment remain key concerns for sustainable recovery (Scottish Government, 2025). 

Impact of Brexit

Brexit has constrained Scotland’s growth, raised costs, and disrupted trade.

The Scottish Government acknowledges that Brexit has slowed economic growth, restricted trade, pushed up food and business costs, and reduced opportunities, especially for younger people. Post-Brexit, Scottish businesses have faced new trade barriers, red tape, and regulatory divergence. (Scottish Government, 2023).

Exporters to the EU now incur higher costs and paperwork burdens. Key sectors like seafood and agriculture have borne a disproportionate share of these burdens, with additional export certification, lost quota access, and labour shortages in processing. In quantitative terms, the trade impact alone is estimated to cost Scotland around £4 billion (Scottish Government, 2025). Modelling suggests that by 2030, Scotland’s GDP could be about 6% lower than it would have been under continued EU membership (European Movement Scotland, accessed 2025). Other estimates from long-term structural modelling, project that Brexit has reduced investment, trade intensity, labour mobility and productivity relative to a “remain” counterfactual.  

That said, the scale of effect is uncertain and uneven across sectors. Some areas may adapt or pivot toward non-EU markets, but the structural drag from trade frictions, lost integration, and increased cost burdens remains a persistent challenge.

"Scotland has now left the world's biggest single market and no longer enjoys freedom of movement, resulting in labour shortages across the NHS, agriculture, and our hospitality sector."

- Angus Robertson, Cabinet Secretary for Constitution, External Affairs and Culture (2023).

Cost of Living

Scotland is grappling with a serious cost-of-living crisis. Inflation surged in recent years, driven by energy, fuel, food, and supply pressures, and has outpaced wage growth, eroding real incomes. The burden is felt most sharply by low-income households, many of whom spend a larger share of their income on essentials and have little financial buffer. Despite being a renewable energy superpower, Scots pay more for energy on average than those living in other parts of the UK (Scottish Government, 2025). 

In rural and remote areas, the impact is even more acute: living costs (energy, transport, food) are estimated to be 15–30% higher than in urban areas, adding a “rural premium” to inequality pressures (UK Parliament, 2025).  Many households report cutting back on heating, travel, and non-essential consumption just to cope.

This has a very real impact on people’s health, one estimate suggests that, even after government support, deprived communities could see up to 0.9 years’ reduction in life expectancy and a rise in premature deaths (PMC, 2025). 

Tourism

Tourism continues to play a central role in Scotland’s economy, contributing over £10 billion  annually and supporting 245,000 jobs across the country.

Recent reports highlight strong growth in international visitors, particularly from Europe and North America, with overseas spending reaching record levels in 2024 and boosting overall business confidence in the service sector (VisitScotland, 2025, NatWest Group, 2025).

However, the domestic market remains under pressure from the rising cost of living, while many smaller operators continue to struggle with labour shortages, increasing costs, and uneven regional recovery (Scottish Tourism Alliance, 2025, DRAM Scotland, 2025). Looking forward, the industry’s resilience will depend on how it adapts to these pressures, balancing visitor growth with investment in infrastructure, skills, and more sustainable, low-carbon tourism models.

Potential New Industries

Scotland is well-positioned to build on its natural advantages in renewable energy and develop hydrogen, offshore wind, and clean power as new industrial pillars.

Green Hydrogen: There are plans to produce 3.3 million tonnes of green hydrogen annually by 2045, enough to meet around 90% of current energy demand (Scottish Government 2024).

Offshore Wind: This sector is growing rapidly, there are moves to support large-scale electrolytic hydrogen hubs, green hydrogen hubs, and infrastructure linked to clean fuels and net zero technology (UK Government, 2023, Scottish Government, 2024).  

New Technologies: AI is gathering momentum: over half of Scottish businesses believe that AI will drive productivity and profitability (Scottish Financial Newis, 2025). Scotland is also getting major infrastructure upgrades: a £750 million investment for a new national supercomputer in Edinburgh, for example, which boosts its research, computing, AI capability, and international profile (UK Government, 2025).  

Timber and Forestry: These sectors stands out as a strong, sustainable growth sector. It already contributes over £1.1 billion to the economy and supports 34,000 jobs (Scottish Forestry, 2023). The “Roots for Future Growth” strategy aims to double its Gross Value Added by 2025 by scaling forest planting, improving value-added products, growing markets and boosting skills capacity (Scottish Financial Review, 2025).

Logie Timber Forestry