Economic Commentary June 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.

• Global business activity continued to expand in May, partly reflecting a boost from clients front-loading demand to mitigate expected price rises and supply disruptions. Data signalled expansions of output in the US, China, Japan and India. Europe fared worse (on average) with both the Euro area and the UK registering contractions.
• UK GDP contracted by 0.1% in April, following growth of 0.3% in March and 0.4% in February. A 0.2% fall in services was partially offset by a 0.1% rise in construction; production showed no growth.
• Business activity growth was confined to just 3 out of 12 UK regions/nations in May, as rates of input and output price inflation remain elevated.
• UK consumer price inflation was 2.8% in the year to May, unchanged from the 12 months to April. Meanwhile producer input inflation accelerated to its highest level (8.7%) in more than three years, amid continued pressure from energy prices linked to the Middle East conflict.
• The Scottish economy gained some momentum in March with growth of 0.6%, after contraction in February and January. Output grew in the production (+1.7%), construction (+1.5%)  and services (+0.3%) sectors. In the three months to March, GDP grew by 0.1%.
• 76% of businesses were very or somewhat concerned about energy prices in May as energy costs rose for 79% of firms in 2026 Q1, with 89% anticipating further increases, largely driven by disruption stemming from the Middle East conflict. Despite increases to input costs, only some (21%) increased the prices of the goods/services they sold in May.
• Scotland’s labour market continues to cool as the number of payrolled employees decreased by 7700 (-0.3%) over the year to May (the eighteenth consecutive monthly fall).
• SE customers are cautious about their outlook as cumulative shocks and the long-standing challenges of the cost of doing business, worker shortages and access to investment funding remain, with rising energy costs increasingly causing concern for businesses.
• The OECD project global GDP growth to slow from 3.4% in 2025 to 2.8% in 2026, before picking up to 3.1% in 2027 as higher energy prices are expected to reduce domestic demand growth through 2026, with the terms of trade deteriorating in energy-importing economies. The OECD warns that if Middle East disruptions continue into 2027 then there will be longer lasting negative consequences.
• Scottish GDP growth is projected to be 0.9% for 2026, and 1.0% for 2027, a downgrade from February’s forecasts as rising oil and energy prices, as well as reduced economic activity due to conflict in the Middle East, cast doubt over economic growth.

The paper makes no recommendations.