Economy

Fig. ME.S.E,01; Author's Own, Economy Sketch

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 influence communities at a local level.

How can economic trends affect local communities?

Economic Context

Fig.ME.S.SE.03; 'Percentage Change in Payrolled Employees, Scotland 2025', based on, (NHS Scotland, 2025)

Current Economic Climate

Scotland’s economy in late 2025 is experiencing modest growth, with GDP increasing by 1.1% and forecast to rise to 1.6% in 2026. Despite this, growth remains subdued, due to weak investment, persistent cost pressures, and moderated consumer demand. Although inflation has eased slightly, it continues to affect household spending and business margins. 

The labour market is relatively stable, though significant regional and sectoral disparities persist. The adjacent graph highlights areas that have experienced growth alongside those that continue to struggle.

Public finances face increasing pressure as service demands rise, while long-term challenges such as improving productivity and private investment remain key concerns for achieving sustainable recovery (Scottish Government, 2025). 

Continue below to learn more about Scotland's economic drivers.

Fig. ME.S.IF,02; Author's Own, Social Infrastructure Sketch

Impact of Brexit

The Scottish Government acknowledges that Brexit has contributed to slower economic growth, constrained trade, increased food and business costs, and reduced opportunities, particularly for younger people. In the Post-Brexit era, Scottish businesses have faced additional trade barriers and regulations, further limiting competitiveness and resilience (Scottish Government, 2023).

“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 (Scottish Government, 2023)

Exporters to the EU now face increased costs and administrative burdens. Key sectors such as fishing and agriculture have been disproportionately affected, burdened by additional export certification requirements, reduced access to quotas and labour shortages within processing and supply chains. In quantitative terms, the trade impact alone is estimated to cost Scotland around  £4 billion (Scottish Government, 2025).

Predictive analysis suggests that by 2030, Scotland’s GDP could be approximately 6% lower than it would have been under continued EU membership.

Long-term structural modelling further indicates that Brexit has reduced investment, trade intensity, labour mobility and productivity relative to a "Remain Scenario". While some areas may adapt or pivot toward non-EU markets, the structural drag caused by trade frictions and increased cost burdens is likely to remain a persistent challenge (European Movement Scotland, accessed 2025).

Fig.ME.S.E.04; Authors Own, 'Brexit Sketch'

Fig.ME.S.E.05; Authors Own, 'Employee's earning less than Real Living Wage, Scotland', based on, (The Scottish Government, 2025)

Fig.ME.S.E.06; Authors Own, 'Median Wage vs Real Wage, Scotland', based on,

(The Scottish Government, 2025)

Fig.ME.S.E.07; Authors Own, 'Impacts of Cost of Living on Average Wage, Scotland', based on,

(The Scottish Government, 2025)

Fig.ME.S.E.08; Authors Own, 'Consumer Price Increase, Scotland', based on,

(The Scottish Government, 2025)

Fig.ME.S.E.09; Authors Own, 'Inflation Rate, Scotland', based on,

(BBC News, 2025)

Fig.ME.S.E.10; Authors Own, 'Weekly earnings by gender, Scotland', based on,

(The Scottish Government)

Cost of Living

Scotland is grappling with a serious cost of living crisis. Inflation has surged in recent years, driven by pressures on energy, fuel and food supply, outpacing wage growth and eroding real incomes. The burden is felt most heavily 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 more intense. Living costs are estimated to be 15–30% higher than in urban areas, adding a “rural premium” to inequalities pressures (UK Parliament, 2025). Many households report cutting back on heating, travel and other basic needs simply to cope.

This has had a direct impact on health. One estimate suggests that even after government support, deprived communities could experience up to a 0.9 year reduction in life expectancy and a rise in premature deaths (PMC, 2025). 

Economic Drivers