Scottish economy 'well placed to strengthen' in months ahead
The accountancy giant has published its forecasts in its latest European Economic Outlook, in which it says businesses in Scotland will benefit from new agreements with key trading partners, including the recently signed UK-India free trade deal. The deal will reduce tariffs on imports of whisky and gin to India from 150% to 75%, before being cut to 40% by the tenth year of the agreement.
While KPMG said there are reasons for the Scottish economy to be optimistic in 2025, it highlighted challenges in the present year. It found Scottish GDP expanded by just 0.4% in the first quarter of the year, compared with 0.7% for the UK as a whole, as rising input costs – including higher employer national insurance contributions – continued to squeeze margins, delay hiring and sustained inflationary pressure. It also noted that consumer confidence had weakened, with April's Scottish Consumer Sentiment Indicator falling to its lowest level since the middle of 2023.
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KPMG forecasts that Scottish GDP will expand by 1% in 2025, adrift of 1.2% growth predicted for the UK.
It released the report on the day the UK economy was reported to have contracted by 0.3% month-on-month in April. Manufacturing activity pulled back sharply amid a record drop in exports to the US following the introduction of new import tariffs by President Donald Trump.
'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,' said Yael Selfin, chief economist at KPMG in the UK.
'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.'
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