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  • Following a mixed start to the year, optimism returns to nation’s mid-market scale firms as small businesses prepare for greater growth in the next 12 months.
  • Travel, Tourism & Leisure proves to be a key growth engine for the country as Business Services activity shows strongest rise since 2024.

 

Scotland’s economy continues to show signs of improvement as it enters the second half of 2025– with increasing confidence across mid-market businesses, solid performances across technology media and telecommunications (TMT) companies, and the fastest uptick in business services activity since 2024.

The findings are contained in a new report from Royal Bank of Scotland reflecting on how Scotland’s economy has performed this year.

The report, which includes new data on the country’s small and mid-market sectors, shows that the nation has remained on a positive growth trajectory since May, driven by TMT, business services and Travel, Tourism and Leisure.

It also shows that Scottish employment, led by the services sector, grew in May and has remained broadly stable through the first half of the year, comparing favourably against the rest of the UK. While concerns around rising employment costs and potential negative consequences for the tourism sector persist, the industry continues to help drive activity across all regions of Scotland.

After a strong June, confidence that opportunities for growth will continue into next year are at their highest this year, with five of the six areas of the Scottish private sector economy tracked by the survey expecting further improvement. Across the private sector as a whole, a third of firms predict a rise in output in the next 12 months, with one in ten forecasting a reduction.

The manufacturing sector is still facing considerable challenges, with production in Scotland remaining in contraction in June – though this was at a slower pace than seen in May, with Consumer goods showing more resilience than other parts of the sector towards the end of H1 2025.

 

Commenting on the Tracker’s findings, Paul Thwaite, CEO of NatWest Group said:

“While we continue to see a mixed picture for businesses in Scotland, it is encouraging to see some signs of momentum across the economy. Firms remain resilient, with activity and confidence improving in many areas, although this varies by sector as well as individual circumstances.

 “Through their deep local and sectoral expertise, our network of relationship managers continue to support our customers in navigating ongoing uncertainty and seizing the opportunities ahead, helping to deliver growth across Scotland and the UK.”

 

Sebastian Burnside, Royal Bank of Scotland Chief Economist, said:

"Following the challenging start to the year, Scotland’s economy hit a high point in June with private sector businesses reporting their strongest growth of the year so far. Business services and travel and tourism led the way, with mid-market firms showing renewed confidence in future growth.

 “Scotland’s businesses report 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.

 “Whilst there has been some stabilisation, businesses are still facing a rapidly changing international environment and domestic pressures — as we can see with manufacturers who reported tougher business conditions in June, particularly amongst smaller firms. These findings reflect a cautiously optimistic outlook for the Scottish economy, underpinned by encouraging indicators and the strength of the services sector.”

 

IN DETAIL

Business services leads in June

Business services and Travel, tourism & leisure were the standout growth drivers in June, while Technology, Media and Telecoms deserves an honourable mention for its robust pace of business activity expansion on average through the first half of the year.

The Business services sector, which includes professional services and other providers of scientific, technical and commercial services, saw its strongest upturn since October 2024. This highlights that the ‘knowledge economy’, which is a dominant segment of service activity across Scotland’s cities and regions, has begun to find its feet after rising global economic uncertainty acted as a severe constraint on client budgets earlier in the year.

 

Travel and tourism on the up

Travel, tourism & leisure has remained a key growth engine for Scotland’s service economy in 2025, despite worries among many businesses about the impact of rising employment costs.

 

Consumer goods a bright spot as manufacturers navigate post-pandemic challenges

The Consumer goods sector has seen a solid post-pandemic recovery in production and showed some resilience during the first half of the year. This contrasted with persistent demand headwinds in the Intermediate goods and Investment goods segments, which was linked to elevated risk aversion and cutbacks to capital expenditure plans across global markets.

 

Majority of Scottish sectors predict growth in next 12 months

Turning towards the future, we find that five out of the six sub-sectors of the Scottish private sector economy monitored by the survey are optimistic about the year ahead business outlook. Technology, Media and Telecoms are 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.

 

New trackers of company size performance

This report, for the first time, reflects the findings of Royal Bank of Scotland Small Business Growth Tracker and the Royal Bank of Scotland Mid-Markets Tracker, to help illustrate prevailing business conditions and the unique challenges faced by these businesses.

We find that Mid-market businesses are particularly optimistic about their growth prospects for the year ahead, while small businesses saw a recovery in confidence to a 10-month high in June.

 

Summary

Scottish private sector output expanded for the second month running in June and at the fastest pace so far in 2025, according to the latest Royal Bank of Scotland Growth Tracker.

Optimism regarding the year ahead business outlook meanwhile reached its highest since October 2024, supported by positive sentiment in five out of six monitored sub-sectors.

Our report provides a detailed overview of growth drivers across the Scottish manufacturing and service sectors during the first half the year, focussing on key industry sub-sectors, mid-markets and small business.  

The headline seasonally adjusted Royal Bank of Scotland Growth Tracker registered 50.9 in June, up from 50.5 in May, to indicate a marginal expansion of business activity. This highlighted a sustained rebound in business conditions from the downturn seen from last December to April, with output growth now at its highest level since November 2024.

Scottish service providers outperformed in June, which continued the trend seen throughout the first half of 2025. Growth was driven in part by another robust expansion of business activity in Travel, tourism & leisure. Moreover, the Business services sub-sector returned to growth in June. Technology, media & telecoms was the fastest-growing segment in the first half of 2025.

Survey respondents suggested that resilient consumer spending and rising global demand for technology services were key growth drivers. At the same time, elevated risk aversion and delayed decision-making among clients were cited as factors weighing on demand, especially in the manufacturing sector. That said, receding concerns about US tariffs helped to slow the pace of decline at investment goods producers in June.  

Consumer goods remained the best-performing area of the manufacturing sector in June. While output has decreased during the first half of 2025, the Consumer goods segment has grown more quickly than all monitored sectors except Business services over the past five years amid a strong post-pandemic recovery in production. Intermediate goods producers meanwhile noted that subdued global demand and elevated cost pressures had again constrained output volumes.

Scottish private sector employment was broadly stable in June, which compared favourably with fragile UK-wide labour market trends. Additional staff hiring in the service economy broadly offset a solid decline in the manufacturing sector.

Latest data indicated that job creation was led by Technology, media & telecoms, with employment growth unchanged from the ten-month high seen in May. Investment goods producers recorded the steepest fall in workforce numbers during June. On a five-year horizon, Business services has registered the strongest jobs growth, followed by Investment goods producers.

Looking ahead, positive sentiment regarding prospects for business activity growth were seen in five out of six areas of the Scottish private sector economy, with Investment goods the only exception. This was up from four in May, driven by renewed optimism in the Consumer goods sector. Across the private sector as a whole, 34% of firms predict a rise in output in the next 12 months, while only 11% forecast a reduction.

In the manufacturing sector, Consumer goods producers often noted an expected upturn in household spending over the year ahead. However, those in the Investment goods category typically noted concerns about elevated business uncertainty at home and abroad, alongside cutbacks to capital spending budgets.  

Technology, media & telecoms was the most optimistic sub-sector in June, followed by Business services and Travel, tourism & leisure. Output growth expectations in the Business services category improved to the strongest since July 2021, helped by receding concerns about the impact of US tariff announcements on client demand. Businesses in Technology, media & telecoms and Travel, tourism & leisure meanwhile commented on hopes of a boost to workloads from a recovery in consumer spending over the year ahead, supported by lower borrowing costs and easing inflationary pressures.

 

Company size

At 50.8 in June, the Royal Bank of Scotland Mid-Market Growth Tracker was down from 52.1 in May but above the 50.0 no-change threshold for the second month running. Higher levels of business activity at mid-market firms reflected another solid upturn in the service sector. 

The Royal Bank of Scotland Small Business Growth Tracker posted 50.6 in June, up from 48.9 in May and in expansion territory for the first time since January amid a stronger contribution from the service sector. 

Royal Bank of Scotland Growth Tracker Special Report

Download the Royal Bank of Scotland Growth Tracker Special Report

MEDIA CONTACTS:

NatWest: Jonathan Rennie, 07769 932102 jonathan.rennie@natwest.com

S&P Global Market Intelligence: Hannah Brook, 07483 439812 hannah.brook@spglobal.com press.mi@spglobal.com

 

Notes to editors

The Royal Bank of Scotland Growth Tracker is compiled by S&P Global from responses to questionnaires sent to Scottish companies that participate in S&P Global's Scotland manufacturing and services PMI surveys. 

Survey responses are collected in the second half of each month and indicate the direction of change compared to the previous month. A diffusion index is calculated for each survey variable. The index is the sum of the percentage of ‘higher’ responses and half the percentage of ‘unchanged’ responses. The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease. The indices are then seasonally adjusted.

Small companies have been defined as those with 1-49 employees. The Mid-market covers companies with 50-2500 employees.

A breakdown of the sector definitions by Standard Industrial Classification (SIC) code can be provided on request. 

For further information on the Growth Tracker survey methodology, please contact economics@spglobal.com.

 

About PMI

Purchasing Managers’ IndexTM (PMI®) surveys are now available for over 40 countries and also for key regions including the eurozone. They are the most closely watched business surveys in the world, favoured by central banks, financial markets and business decision makers for their ability to provide up-to-date, accurate and often unique monthly indicators of economic trends. To learn more, go to www.spglobal.com/marketintelligence/en/mi/products/pmi.

 

About NatWest

NatWest serves customers in England and Wales, supporting them with their personal, private, and business banking needs. NatWest helps customers at all stages in their lives, from opening student accounts, to buying their first home, setting up a business, and saving for retirement. Alongside a wide range of banking services, NatWest offers businesses specialist sector knowledge in areas such as manufacturing and technology, as well as access to specialist entrepreneurial support.

 

About S&P Global (NYSE: SPGI)

S&P Global provides essential intelligence. We enable governments, businesses and individuals with the right data, expertise and connected technology so that they can make decisions with conviction. From helping our customers assess new investments to guiding them through ESG and energy transition across supply chains, we unlock new opportunities, solve challenges and accelerate progress for the world.

We are widely sought after by many of the world’s leading organizations to provide credit ratings, benchmarks, analytics and workflow solutions in the global capital, commodity and automotive markets. With every one of our offerings, we help the world’s leading organizations plan for tomorrow, today. www.spglobal.com.

 

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