Gathering momentum
Scotland’s economy is showing signs of renewed momentum midway through 2025, with the Royal Bank of Scotland Growth Tracker Special Report revealing a broad-based rebound in business activity.
After a challenging start to the year, marked by global uncertainty and domestic cost pressures, Scotland’s economy hit a high point in June with private sector businesses reporting their strongest growth of the year so far.
While the data revealed a diversity of performance across businesses and sectors, we believe that many Scottish firms are regaining confidence – particularly in the services sector, where growth is accelerating across multiple industries.
Scotland’s businesses are also reporting higher employment trends than other parts of the UK, with mid-market services businesses and technology, media & telecoms firms scoring especially highly. This indicates confidence in future growth, but also provides a key link to the household sector, for whom job security is a key driver of confidence.
Here we outline five reasons why we believe the current prospects for Scottish business are looking increasingly positive.
1) Business Services: the knowledge economy rebounds
Leading the recovery in Scottish business confidence is the Business Services sector, which includes professional, scientific, and technical services. June marked the strongest upturn in activity since October 2024, signalling a resurgence in Scotland’s knowledge economy.
This rebound follows a period of constrained client budgets and reflects growing optimism among mid-market firms, many of which are now hiring and investing in new capabilities. The resurgence appears to have sparked greater confidence, with expectations of future growth also hitting a four-year high.
2) Travel, Tourism & Leisure: a resilient engine of growth
Scotland’s Travel, Tourism & Leisure sector continues to be a vital contributor to economic momentum. Despite rising employment costs, businesses in this space recorded robust growth in June. This was supported by resilient consumer demand and seasonal factors such as warmer weather.
While cost pressures remain a concern for the sector, businesses signalled the smallest squeeze on margins so far this year, which was a reversal of the trend seen since the pandemic. The sector’s outlook is also buoyed by expectations of increased consumer spending and easing inflation.
3) Technology, Media & Telecoms: confidence at record highs
Technology, Media & Telecoms (TMT) firms are the most optimistic about the year ahead, with confidence levels holding close to record highs. This reflects strong global demand for digital services and a healthy pipeline of investment in new products and marketing initiatives.
On average, in the first half of 2025, TMT saw the weakest cost pressures compared with other sectors. TMT businesses also led job creation in June, underscoring the sector’s role as a driver of employment and innovation across Scotland.
4) Consumer Goods: steady recovery amid manufacturing headwinds
While Scotland’s manufacturing sector remains under pressure, the Consumer Goods segment – covering food, electronics, and household items – has seen a solid post-pandemic recovery in production and has showed some promising resilience during the first half of the year.
It was the best-performing manufacturing group in June and has outpaced other segments over the past five years. Producers are cautiously optimistic, citing expectations of stronger household demand and improved market conditions.
5) Mid-Market and Small Businesses: confidence rebounds
Our report also shines a light on company size dynamics. Mid-market service providers posted solid growth and continued hiring, are particularly optimistic about their growth prospects for the year ahead, while small businesses saw a recovery in confidence in June to a ten-month high.
These segments are crucial to Scotland’s economic fabric and their renewed optimism bodes well for broader regional development.
Looking ahead
With five out of six monitored sub-sectors predicting growth over the next 12 months, we believe Scotland’s private sector is entering a phase of cautious optimism. Technology, Media and Telecoms is the most upbeat category, followed by Business Services. Encouragingly, these parts of the Scottish economy are also well represented in the Startup and Mid-Market segments. More challenges and volatility will undoubtedly surface in the second half of 2025, but it’s certainly encouraging to see the progress made in parts of the Scottish economy during a turbulent first six months of the year.
