This report outlines the key results from our latest Fraser of Allander Institute (FAI) Scottish Business Monitor in the fourth quarter of 2024.
The survey sampled over 300 firms in December and January from across the Scottish economy, examining business sentiment in Q4 2024 and the outlook for the year ahead.
At the end of calendar year 2024, business confidence remains pessimistic. Firms surveyed reported decline in business activity – both volume and sales in the last three months of 2024. Firms also reported a decline in the level of export activity and new capital investment despite central bank monetary easing which is gradually easing credit conditions in the economy.
Changes announced in the UK Government Budget pertaining to employer NICs contributions are particularly weighing on the business environment- with three quarters of businesses surveyed indicating that these changes are expected to significantly impact their operations in 2025. Cost pressures also remain a lingering and ongoing concern with 94 per cent of businesses surveyed expect higher total business costs over the first half of 2025.
Our latest results also show that:
- Three-quarters of businesses surveyed economic growth in Scotland to remain weak or very weak over the next 12 months This is an increase of almost 18 percentage points over the previous quarter (2024Q3).
- While headline inflation levels have been falling, cost pressures remain an ongoing concern for businesses. 77 per cent of businesses surveyed reported higher total employee costs in 2024Q4 relative to 2024Q3. 94 per cent of businesses surveyed expect total employee costs to be higher again in the first six months of 2025.
- Businesses continue to attach importance to political and economic certainty. Businesses surveyed overwhelmingly flagged economic/ business uncertainty (98) %, and political uncertainty (90%) as the major concerns in the first three months of 2025.
Authors
Sanjam Suri is a Knowledge Exchange Fellow at the Fraser of Allander Institute. Sanjam works closely with internal and external partners specializing in business and economic analysis. Sanjam also lead's the Scottish Business Monitor publication. Prior to this, Sanjam was the Lead Country Risk Analyst at Export Development Canada in Ottawa. Sanjam has also worked as an Economist and Senior Economist at the Bank of Canada in Ottawa. Sanjam has an undergraduate degree in Mathematical Economics from Trent University (Canada), and a Masters degree in Financial Economics from Western University (Canada).
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.