By Terry Murden
Scotland鈥檚 economic growth has been downgraded by a key research group to reflect heightened UK and global uncertainty, including the impact of April鈥檚 tax and tariff hikes.
The University of Strathclyde鈥檚 Fraser of Allander Institute is now forecasting the Scottish economy will grow by 0.8% this year and expand by 1% in 2026.
As recently as April it predicted growth of 0.9% in 2025 and expansion of 1.1% next year in Scotland.
The research institute said: 鈥淥ur latest forecasts reflect greater uncertainty and difficult economic circumstances.鈥
It noted other forecasters had increased gross domestic product growth projections for Scotland and the UK next year, while cutting expectations for 2025.
It said its revised outlook 鈥渃omes despite more upbeat projections from both the Scottish Fiscal Commission and the Office for Budget Responsibility, which have recently upgraded their expectations for 2026 whilst similarly revising down their GDP forecasts for 2025.鈥
Fraser of Allander is holding its 2027 forecast at 1.1%.
It said: 鈥淓conomic growth is now slowing compared to the start of the year and inflation has also edged up to 3.4%, after staying below 3% throughout 2024.
鈥淭he business environment is also showing signs of strain, with companies reporting cutting back on activities in the first quarter compared to last year, plagued by rises in national insurance contributions, which took effect in April, alongside uncertainty surrounding President Trump鈥檚 trade tariffs. Indeed, pay growth and employee numbers are down, signalling potential weaknesses in the labour market.鈥
Mairi Spowage, director, said: 鈥淎fter a strong start to the year, the Scottish economy has faltered in March and April and is essentially the same size in real terms as it was six months ago.
鈥淯nfortunately, the wider business environment and global events are still taking a toll on businesses and consumers, which is having a dampening effect on spending and business investment.鈥
Jo茫o Sousa, deputy director of Fraser of Allander, said: 鈥淭he fiscal announcements by both governments suggest that there are significant economic challenges in the years and months to come for the UK and Scottish governments.
鈥淧articularly from 2027-28 onwards, the choices of government look to become more difficult. Of course, this is the role of the government in power: but the difficulties of the UK Government this week show that events can quickly derail its plans.鈥
Scottish Conservative shadow finance secretary Craig Hoy said: 鈥淲hile there鈥檚 no question external factors are impacting Scotland鈥檚 economy, it鈥檚 clear anti-business SNP policies are also stifling growth.
鈥淭he Nationalists鈥 failure to fully pass on the rates relief available to businesses south of the border, coupled with them making Scotland the highest taxed part of the UK, explains why the growth rate here is even lower than the anaemic rate Keir Starmer is presiding over.
鈥淪cotland is currently saddled with two disastrous, high-tax-low-growth, left-wing governments.鈥