Economic Commentary June 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 economies in May, except China. Service sector performance was generally stronger while manufacturing declined in the UK, Eurozone and Japan.
• UK GDP contracted by 0.3% in April, following growth of 0.2% in March. Output was down in the service (-0.4%) and production/manufacturing sectors (-0.6%), while the construction sector grew (+0.9%). Over the longer term, in the three months to April, GDP was up 0.7%. 
• Business activity rose across the UK as a whole in May with half of nations/regions growing and half contracting. All regions saw an increase in growth expectations in May Vs April as levels of uncertainty eased. 
• UK consumer price inflation rose by 3.4% over the year to May, down slightly from 3.5% in April, but remaining above the Bank of England’s target of 2%. 
• The Scottish economy contracted by 0.2% in March, following -0.2% in February. Output expanded in construction (+0.3%), flatlined in services (0%) but contracted in production/manufacturing (-1.6%). In the three months to March, GDP grew by 0.4%. 
• 25% of businesses reported an increase in monthly turnover in April (down from 41% in March) while 27% reported a decrease (vs 12% in March). The cost of labour was the most significant ‘turnover challenge’ reported, likely due to the increased employer NI contributions introduced in April. 
• The labour market continues to cool as the number of payrolled employees decreased by 23,000 (-0.9%) over the year to May (the sixth consecutive monthly fall). 22% of businesses continue to report worker shortages but the proportion has been falling since March. 
• 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. Energy supply chain companies are increasingly nervous about the sector which they report as slowing down domestically and some are looking to other markets and sectors for orders. 
• The OECD is forecasting global GDP growth of +2.9% in 2025, a downgrade of -0.2ppts. The World Bank also downgraded its forecast and are predicting global growth of 2.3% in 2025, the slowest rate since 2008. 
• The Scottish Fiscal Commission has downgraded its GDP growth forecast for 2025 to 1.1% due to ongoing developments in international trade policy which have created significant uncertainty and volatility. Growth of 1.8 is forecast for 2026. 

The paper makes no recommendations.