SCOTLAND’S economy is set to outstrip the UK’s as a whole in 2026, according to a top financial firm.
KPMG, one of the “big four” accounting firms, predicted in its latest European Economic Outlook that Scotland would see GDP growth of 1.2% in 2026, compared to 1.1% for the UK as a whole.
Yael Selfin, KPMG’s chief economist in the UK, said that new trade agreements – such as the deal with India – could give Scotland a “modest edge” over elsewhere in the UK.
The India trade deal cuts whisky tariffs from 150% to 75%, with plans for it to be reduced to 40% over 10 years.
In 2026, Scotland’s projected 1.2% growth is expected to outstrip France (0.8%), Germany (1.1%), the Netherlands (1.1%), and Italy (0.6%).
However, Europe-wide, the UK’s 1.1% growth rate is expected to lag behind countries such as Spain (1.8%), Ireland (1.4%), Poland (3.2%), Denmark (1.8%), and Portugal (2.3%).
KPMG further identified several challenges holding back Scottish growth in 2025.
The Edinburgh Chamber of Commerce noted: “Scottish GDP grew by just 0.4% in Q1 2025, behind the UK average of 0.7%, as rising input costs, including higher employer National Insurance contributions, continue to squeeze margins, delay hiring, and sustain inflationary pressure.
“Consumer confidence has also weakened, with April’s Scottish Consumer Sentiment Indicator (SCSI) falling to its lowest level since mid-2023.”
KPMG chief economist Selfin said: “While current pressures on businesses are significant, Scotland’s economy is well placed to strengthen in the months ahead, and if conditions improve as we expect, could give it a modest edge over the UK as a whole in 2026.
“With inflation expected to fall back to target and interest rates likely to ease, Scottish firms stand to benefit from a more stable economic climate.
“Many of its key sectors, including food and drink and manufacturing, are also acutely affected by international trade tensions – so any new agreements with key export partners could give Scottish businesses more reason for optimism.”
