The outlook for both Scottish and UK economies has improved and looks to remain positive through 2027, according to the Fraser of Allander Institute at the University of Strathclyde.
In the latest quarterly Economic Commentary, the Institute has forecasted that the Scottish economy will end 2025 with 1.3% growth and will continue to grow by 1.1% across 2026.
This improvement over last quarter’s forecast mirrors similarly upbeat predictions from the Scottish Fiscal Commission (SFC) and the Office for Budget Responsibility (OBR).
At the same time, the number of payrolled employees in Scotland has fallen consistently since mid-2024, with job losses concentrated in hospitality, education, and retail sectors. In recent months, the number of people on unemployment-related benefits has also ticked up.
Institute Director Professor Mairi Spowage said, “Even though we’re seeing growth in the economy, we’ve lost thousands of jobs in hospitality, education, and retail over the course of 2025, and we’re seeing a mismatch between available jobs and the people we have to fill them.
“We know that a lot of people who are not in work are dealing with health conditions, but the jobs that businesses struggle to fill are often physically demanding or in-person, meaning that they may not be suitable for this group of people.”
This edition of the commentary also continues our look into social security in Scotland, focusing on benefits available to pensioners. Benefit spending on pensioners has risen in nominal terms over the last fifteen years, driven largely by the triple-lock on pensions and growing spending on disability-related benefits.
You can see the full commentary here.
Authors
Allison is a Fellow at the Fraser of Allander Institute. She specialises in socioeconomic inequality, labour market dynamics, and the socioeconomic determinants of health.
Hannah is a Fellow at the Fraser of Allander Institute. She specialises in applied social policy analysis with a focus on social security, poverty and inequality, labour supply, and immigration.
Josh is a Knowledge Exchange Assistant at the Fraser of Allander Institute.
Jack is an associate economist at the Fraser of Allander Institute.
Mairi is the Director of the Fraser of Allander Institute. Previously, she was the Deputy Chief Executive of the Scottish Fiscal Commission and the Head of National Accounts at the Scottish Government and has over a decade of experience working in different areas of statistics and analysis.