FAI Economic Commentary 2023 Q3

Growth in the economy has been faltering and pretty muted over 2023, with a high interest rate environment and wider economic uncertainty leading to investment being delayed or cancelled, according to the Fraser of Allander Institute.

The Institute’s quarterly Economic Commentary, which includes an assessment of all the latest key data on the UK and Scottish economies, is published today.

In the Deloitte-sponsored Economic Commentary, the University of Strathclyde researchers have set out their new forecasts for the Scottish Economy.

The economists are forecasting growth of 0.2% in 2023, 0.7% in 2024 and 1.2% in 2025. For 2023, this is a revision down from the Institute’s previous set of forecasts in June, as data for 2023 to date has been much weaker than expected.

The forecasts for 2024 and 2025 have not changed since June. The most recent data on inflation, which held steady at 6.7% in September, shows that the high inflationary and interest rate environment is likely to persist for longer than previously thought – therefore it is likely that there are more risks to the downside for these forecast numbers than when they were presented in June.

Analysis in the Commentary this quarter includes a detailed look at the hospitality sector in Scotland. This sector, one of the hardest hit over the period of the pandemic, is a large employer in Scotland and the institute has been carrying out research with employers and employees into how pay and conditions in the sector can be improved.

Professor Mairi Spowage, Director of the Institute, said: “Growth in 2023 so far has presented a pretty mixed picture. While much better than we were expecting at the end of 2022 – with the predictions of recession proving thankfully unfounded.

“Despite this though, it is clear that businesses are not feeling that conditions are great right now, with many delaying or cancelling investment due to the high interest rate environment and wider economic uncertainty.”

Angela Mitchell, Senior Partner for Scotland at Deloitte, said: “This quarter’s commentary shows a thoroughly mixed outlook for our economy and, accordingly, for business and consumers. Notably, the rate at which businesses are delaying or cancelling investments is high. This chimes with findings from our latest CFO Survey, which found CFOs are focused on reducing leverage and capital expenditure is seen as a low priority. However, the commentary encouragingly notes that there are signs that the investment hesitation is only temporary.”

The Commentary also looks ahead to the Autumn Statement, which will be presented by the UK Chancellor on 22nd November. This will be important to set the scene – and indeed broadly the spending envelope – for the Scottish Budget on 19th December.

Mitchell added: “The commentary raises the critical need for meaningful engagement and co-production between industry and government in enacting the kind of systemic change that is needed for vital sectors of our economy to flourish. Ahead of the UK Government’s Autumn Statement, which will be followed closely by the Scottish Budget, that meaningful dialogue is vital to ensure the most urgent needs of our people and businesses are being met.”

João Sousa, Deputy Director of the Institute, said: “The outlook for the public finances continues to be challenging, with slow growth translating into weak tax revenue forecasts. Despite recent positive revisions to UK growth, this is unlikely to translate into more fiscal headroom for the Chancellor.

“So, the spending envelope remains tight, which will put further pressure on the Scottish Government’s finances in the run-up to the Scottish Budget. There have been a number of spending commitments made by the Scottish Government in recent weeks that are likely to make the situation more challenging, including funding the council tax freeze.”


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.

Calum is an Associate Economist at the Fraser of Allander Institute (FAI) and a Researcher at the Centre for Inclusive Trade Policy (CITP). He specialises in economic modelling and trade, and holds an MSc in Economics from the University of Edinburgh.

Chirsty is a Knowledge Exchange Associate at the Fraser of Allander Institute where she primarily works on projects related to employment and inequality.

Kate is a Knowledge Exchange Assistant at the FAI working across a number of project areas. She is currently studying for her MSc in Economics at the University of Edinburgh and has a bachelor’s degree in Economics from the University of Strathclyde. Kate is also the Outreach Coordinator at the Women in Economics Initiative which aims to encourage equal opportunity and improve representation in the field.

João is Deputy Director and Senior Knowledge Exchange Fellow at the Fraser of Allander Institute. Previously, he was a Senior Fiscal Analyst at the Office for Budget Responsibility, where he led on analysis of long-term sustainability of the UK's public finances and on the effect of economic developments and fiscal policy on the UK's medium-term outlook.

Adam is an Economist Fellow at the FAI who works closely with FAI partners and specialises in business analysis. Adam's research typically involves an assessment of business strategies and policies on economic, societal and environmental impacts. Adam also leads the FAI's quarterly Scottish Business Monitor.

Find out more about Adam.

Allison is an Associate Economist at the Fraser of Allander Institute. She specialises in socioeconomic inequality and labour market dynamics.

Ciara is an Associate Economist at the Fraser of Allander Institute. She has a broad research experience across different areas including poverty and inequality, the voluntary sector, health, education, trade, and renewables and climate change. Ciara has an MSc in Applied Economics (Distinction) and a first-class BA Honour’s degree in Economics and Finance, both from the University of Strathclyde.

Brodie is a Knowledge Exchange Assistant at the Fraser of Allander Institute. She has recently completed an MSc in Applied Economics at the University of Strathclyde and has a first-class Honour’s degree in Economics and Politics from the University of Glasgow

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Founded in 1975, the Fraser of Allander Economic Commentary is the leading publication on the Scottish economy and offers an authoritative and independent analysis of the key issues of the day.