Economic Commentary December 2025

Our economic commentary provides a regular update on global, UK, and Scottish economic trends, drawing on recent economic data as well as feedback from businesses.

The methodology consisted of desk research.

• Global business activity expanded at an accelerated pace in October, with growth in both services and manufacturing. Despite this, optimism eased, and exports contracted.
• UK GDP fell by 0.1% in September, following no growth in August. Production fell by 2.0%, whereas services grew by 0.2% and construction grew by 0.2%. Across the quarter, growth was 0.1%.
• Business activity rose in six out of twelve UK nations/regions in October, an increase from just three in September. Scotland was among those that recorded a fall, driven by squeezed client budgets, low levels of new orders and uncertainty across global markets.
• UK consumer price inflation was 3.6% in the year to October, down from 3.8% in September. This is still above the Bank of England’s 2% target, but the drop strengthens the case for interest rate cuts.
• Producer input prices rose by 0.5% in the year to October.
• The Scottish economy contracted by 0.1% in August following a fall of 0.3% in July. Over the month, output was up in Production (+0.3%) but down in Services (-0.2%) and Construction (-0.3%). In the three months to August, GDP grew by 0.7%.
• The top concerns for Scottish businesses are falling demand, taxation and competition with other UK businesses. Cost pressures appear to be easing, though the cost of labour remains the most reported turnover challenge.
• Business surveys show mixed results for business sentiment, indicating small businesses have a more pessimistic outlook for future performance.
• Scotland’s labour market continues to cool as the number of payrolled employees decreased by 16,000 (-0.6%) over the year to October (the eleventh consecutive monthly fall).
• Overall sentiment among SE customers is cautiously optimistic – though some sectors (engineering and construction) are more positive than others (energy).
• The IMF forecasts global economic growth of 3.2% in 2025, easing slightly to 3.1% in 2026. For Scotland, the Fraser of Allander Institute forecasts growth of 1.0% in 2025 and 2026.

The paper makes no recommendations.