Economic Commentary April 2025

The 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.

• Business activity rose across most major global economies in March, except Japan. Service sector performance was stronger; manufacturing contracted in the UK, Eurozone and Japan. 
• The UK economy grew by 0.5% in February, following no growth in January. Output was up in services (+0.3%), construction (+0.4%) and production (+1.5%). 
• KPMG cut their UK GDP growth forecast to just 0.8% for both 2025 and 2026. The introduction of US import tariffs and a rising business tax burden (employer NI contributions) are expected to weigh on UK activity. 
• Business output rose in only five UK regions and nations in March, with Scotland among the worst performers as economic uncertainty and inflationary pressure impacted activity. 
• UK consumer price inflation rose by 2.6% over the year to March, down from 2.8% in February, and remaining above the Bank of England’s target of 2%. 
• The Scottish economy grew by 0.3% in January, following +0.5% in December. Output expanded in services (+0.5%) but contracted in construction (-0.2%) and production (-1.0%). 
• 28% of Scottish businesses reported an increase in monthly turnover in February whilst 23% reported a decrease, the first ‘positive turnover balance’ in five months. However, the proportion reporting concerns about taxation, falling demand and competition is increasing. 
• There are signs that the labour market is cooling as the number of payrolled employees decreased by 11,000 (-0.4%) over the year to March (the fourth consecutive monthly fall). However, 26% of businesses continue to report worker shortages. 
• SE customers are generally optimistic about their own performance but are expressing less confidence in the wider economy particularly due to the global economic environment. Most SE customers won’t be affected by US import tariffs as this is not a major market for them, and those that will are largely adopting a ‘wait and see’ approach. 
• The Fraser of Allander Institute is forecasting GDP growth of 0.9% in 2025 and 1.1% in 2026. The Institute highlights that global economic fragility (including US tariffs), tighter UK fiscal policy, and lingering inflationary pressures are weighing down on growth.

The paper makes no recommendations.