Economic Commentary August 2026

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.

• The global economic upturn gathered pace in July, with rates of expansion in output and new orders accelerating and employment returning to growth. The US led the expansion, while Scotland remained in contraction.
• UK monthly GDP was 0.3% in June after showing no growth in May. Growth was driven by the service sector which offset falls in production and construction. In the three months to June the economy grew by 0.4%, following growth of 0.6% in in the three months to March.
• 10 out of 12 UK nations and regions recorded higher business activity in July, up from just three in June. Scotland and Yorkshire & Humber were the only areas to record decreases in output. All areas saw a fall in cost pressures and growth expectations for the year ahead recovered across most parts of the UK.
• Consumer price inflation rose by 2.9% in the 12 months to July, up from 2.6% in June. Household and household services led the upward contributions. Producer input prices rose by 4.9% in the year to July, down from a rise of 7.4% in the year to June. CPI remains above the Bank of England’s 2% target rate.
• Monthly onshore GDP grew by 0.1% in May, after 0.8% growth in April and 0.3% growth in March. The services sector saw growth (0.3%), while both production and construction fell (-0.4% and -0.8% respectively). In the three months to May, onshore GDP grew by 0.6%.
• In June, 32% of businesses reported higher turnover compared with the previous month, while 20% reported a decrease. Falling demand (17%), worker shortages (12%) and competition (10%) were the leading concerns in August, and looking ahead, 28% expect performance to improve over the next 12 months.
• Scotland’s labour market continued to show signs of cooling: the unemployment rate increased by 1.4ppts to 5.1% over the year to April – June 2026 while the employment rate decreased by 1.1ppts to 74.0%. The number of payrolled workers also continued to fall in the year to July.  
• Overall sentiment remains mixed among SE customers. Many businesses remain optimistic about their products, markets and longer-term opportunities, but are operating cautiously due to cost pressures, funding constraints and wider economic uncertainty.
• GDP forecasts published from the IMF in July project global growth of 3.0% for 2026 and 3.4% for 2027, broadly unchanged from their previous April projections.
• The Fraser of Allander Institute expects Scottish GDP to grow by 1.0% for 2026, and 1.1% for 2027, a slight upgrade from its forecast in April, after stronger-than-anticipated growth at the start of 2026. Nine consecutive quarters of expansion show resilience, but a softer labour market and energy cost pressures cloud the outlook.

The paper makes no recommendations.