The Scottish economy continued to show resilience in the second quarter of 2026, according to the Fraser of Allander Institute at the University of Strathclyde.
In its latest Quarterly Economic Commentary, the Institute largely left its forecasts unchanged “reflecting that this resilience is challenged by the continued uncertainty in global markets.”
The latest commentary said: “GDP grew relatively strongly in the first half of 2026, although the level of uncertainty that businesses, and statisticians, are currently grappling with means that these estimates remain uncertain and are likely to be revised …
“Growth in the year to Q2 2026 was 1.1% in both the UK and Scotland. At present, there is little to suggest that growth will differ substantially in the second half of 2026 …
“The latest available quarterly GDP data reveals quarter-on-quarter growth in both Scotland and the UK; the Scottish economy had a relatively strong quarter, with 0.7% growth to Q2 2026 …
“Relative to 2022 levels, GDP has continued to grow across Scotland and the UK despite ongoing uncertainty. Looking at the long-run picture, since returning to pre-pandemic levels, growth has largely tracked the UK trend, with both economies operating around 4% higher than their 2022 average into Q2 2026 …
“Despite the challenges Scotland has seen in payrolled youth employment over the last decade, it has not seen the same level of decline among young adults as England and Wales, nor the remarkable growth and consistency seen in Northern Ireland.
“In total, 55% of adults aged 16-24 were in payrolled employment in Scotland in Q2 2026, compared to 63% in Northern Ireland, and 50% and 49% in England and Wales respectively …
“Scotland’s unemployment claimant rate (the proportion of the working-age population claiming unemployment-related benefits) remains relatively low compared with the rest of Great Britain.
“After falling from 3.2% in July 2024 to 2.9% during 2025, it has risen modestly over the past year, reaching 3.1% in spring 2026 before easing to 3.0% in July. The UK rate stands higher at 3.8%, while Northern Ireland has experienced the sharpest decline and now has the lowest rate of the four nations.”
However, the Institute said: “Inflation has ticked up slightly in recent months, driven largely by rising housing, energy and transport costs.
“The labour market also continues to show signs of softening, with payrolled employment falling consistently since 2023, and job losses concentrated among younger workers and in the retail and hospitality sectors.
“Conditions remain difficult for many households. The social security system continues to provide important income support, but the increases in some disability benefits have been lower than previously forecast.”
Emma Congreve, Deputy Director of the Fraser of Allander Institute, said: “Scotland’s economy has held up well in the face of continued global uncertainty, but beneath the headline figures there are signs of a labour market under strain, with payrolled employment falling steadily since 2023 and young people bearing much of that impact.
“Against this backdrop, the Scottish Government has set out a five-year Programme for Government, with some big ambitions on public service reform as well as some eye-catching policies.
“The Scottish Budget, due to be announced on 3 December, will be a demanding test of how the Government’s ambitions measure up against the fiscal reality, and where spending will ultimately be prioritised, and in some areas, cut.”