THE UK Government has been blamed for hindering Scottish businesses' growth after a new report showed that Scotland's economy slowed down.
The Scottish Chambers of Commerce survey, carried out with the Fraser of Allander Institute, revealed that despite improving confidence and sales among Scottish businesses, growth has slowed due to several factors.
Experts said spiralling costs, uncertainty over trade tariffs imposed by the United States, and a rise in employer National Insurance Contributions imposed by the Labour UK Government have all hampered Scotland’s economy.
Economics experts at the Strathclyde University-based think tank Fraser of Allander Institute have now downgraded their forecasts for growth.
The think tank now expects economic growth of 0.8% in 2025 and 1.0% in 2026 – which is a slight downgrade from its April forecasts of 0.9% and 1.1%.
It noted Scottish real GDP grew 0.4% in the first quarter of 2025, compared to 0.7% in the UK as a whole.
Last year, Chancellor Rachel Reeves announced in her autumn budget that employers’ NICs would rise from 13.8% to 15%, while the threshold at which firms would start paying also increased.
At the time, business leaders described the policy changes as a “life or death” hike for microbusinesses and SMEs.
The SNP said they have long warned that the current UK fiscal system is unfit for Scotland’s economic needs, and with independence, Scotland would be able to build an economic model with full fiscal powers, which works for the country.
SNP MSP Gordon MacDonald said Scottish businesses need a government which works with them and not “against them”.
He said: “These findings should ring alarm bells in Westminster. Scotland’s businesses are resilient - but their ability to invest, grow and employ is being strangled by a Westminster government entirely out of touch with the needs of our economy.
“Scottish businesses need a government that works with them, not against them. While the UK government refuses to reform immigration to match our labour needs, and hikes taxes on employers trying to stay afloat, the SNP is doing everything we can with one hand tied behind our backs.
“Only with the full powers of independence, over tax, immigration, trade and energy, we could chart a fairer, more sustainable path for Scottish growth.
“Until then, the SNP will continue to press Westminster to reverse damaging policies like the employers national insurance hike and to develop a migration and trade policy that supports, rather than sabotages, Scottish jobs and businesses”.
Looking at the latest data, the think tank found that Scotland’s economic growth had “remained slow”, with rises in the first months of 2025 having been “partially offset” by decreases in March and April.
Speaking as its latest quarterly economic commentary was published, institute director Professor Mairi Spowage said: “After 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.
“Unfortunately, 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.”
The report said: “The slowdown in growth this year is largely due to higher global uncertainty, particularly from the announcement of tariffs in the US and elsewhere.
“With the CPI (Consumer Prices Index) rate at 3.4% in May 2025 after staying below 3% throughout 2024, an uptick in inflation has also played a role.”
The think tank said its latest forecasts “reflect greater uncertainty and difficult economic circumstances”.
It also noted that businesses had reported a slowdown of activity in the first quarter of 2025 compared to the same period last year.
The report said this “decline in activity may reflect the impact of increases to employer national insurance contributions as well as uncertain conditions, particularly from trade and tariff decisions taken by the US government”.
It said the “difficult conditions for business have been echoed in the labour market”, with the think tank noting pay growth has been “slow” and the number of employees has fallen 0.9% from last year.
It also said there was “some indication that the proportion of people living beyond their means in Scotland may have increased compared to this time last year” – but added other indicators of financial stability “seem to be holding steady”.
Deputy First Minister Kate Forbes said: “It is clearer than ever that Scotland’s economy is being impacted by challenging global trading conditions and uncertainty – conditions mirrored across the rest of the UK.
“We are taking ambitious steps to grow the economy by pursuing new investment, building export potential and driving and capitalising on the Scottish innovation at the forefront of many key global industries.
“But we are doing all of this without the full economic powers needed to fully address the issues facing Scottish businesses. We need decisive action from the UK Government to counter the damaging economic impacts of Brexit and business uncertainty.
“This includes reversing its decision to increase employers’ national insurance contributions which, as the Scottish Chambers of Commerce has highlighted, is severely damaging business confidence, investment, growth and jobs.”
A UK Government spokesperson said: “Our Plan for Change is securing our future by growing the economy in all parts of the UK.
“We are investing £1.7 billion in growth projects across Scotland, and our recent trio of trade deals are great news for Scottish businesses, opening up new export opportunities in India, Europe and the USA.
“We are turbocharging economic growth and putting more money into the pockets of working people.”
