Economic Commentary October 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 economy carried positive momentum into September, as output rose at its fastest rate in over three years, with new order growth and business optimism strengthening. The US led the expansion, while Scotland remained in contraction.
• UK monthly GDP grew by 0.1% in August after growth of 0.4% in July. Growth was driven by production (0.8%), while services showed no growth and construction fell by 0.2%. In the three months to August, the economy grew by 0.7%.
• Ten out of 12 UK nations and regions recorded higher business activity in September, although most areas recorded lower growth expectations for the coming year and a rise in cost pressures.  Scotland and the North-West were the only areas to record decreases in output.
• Consumer price inflation rose by 3.5% in the 12 months to September, up from 3.1% in August. Transport, particularly motor fuels, led the upward contributions. Producer input prices rose by 8.3% in the year to September, up from a rise of 6.7% in the year to August.
• Scottish monthly onshore GDP grew by 0.1% in July, after 0.3% growth in June. The services sector saw a contraction (-0.3%), while both the production and construction sectors grew (2.1% and 0.1% respectively). In the three months to July, onshore GDP grew by 0.7%.
• Conflict-related factors continue to affect businesses: 79% are concerned about energy prices (+6ppts since September), rising to 88% in Transport & Storage. 32% are concerned international conflict will impact supply chains this year, with shipping disruption another key supply chain concern (22%).
• Cost pressures for businesses show some signs of easing, although 24% reported input prices increased in August vs July 2026 (-15ppts since April’s high). 14% expect to increase prices in October.
• Scotland’s labour market continued to show signs of cooling: the employment rate decreased by 0.4ppts to 74.0% over the year to June-August 2026 and the number of payrolled workers also continued to fall in the year to September. 33% of businesses expect high demand for management and leadership skills in the coming year, as well as basic and advanced digital skills (30%).
• 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 funding constraints, skills shortages and wider economic uncertainty.
• GDP forecasts published by the IMF in October project global growth of 3.1% for 2026 and 3.4% for 2027, unchanged for 2026 and revised moderately upward for 2027, compared to the April forecast. UK growth is forecast at 1.3% in 2026, before edging down to 1.2% in 2027.
• The Fraser of Allander Institute projected Scottish GDP growth of 1.1% for 2026 and 1.1% for 2027, a slight upgrade from their forecasts in June. 

The paper makes no recommendations.