Scottish economic bulletin: November 2025

Business Conditions

Business activity continues to fall slightly going into the fourth quarter.

Business Activity

• Business surveys going into the fourth quarter of the year indicate that business activity in Scotland remains subdued amid ongoing cost pressures and uncertainty.
• The RBS Growth Tracker business survey indicates that business activity in the private sector contracted for a second consecutive month in October, with the index falling to 49.0 (a reading below 50 indicates contracting business activity).^[9] Although the contraction in activity continues to be relatively mild, new work orders fell for a thirteenth consecutive month and were accompanied by a slight reduction in staffing numbers.

• Business Insights and Conditions Survey (BICS) data also continues to point to a challenging demand landscape. In September most firms (45%) reported that domestic demand had stayed the same over the month, however there was an increased share of firms reporting that demand had decreased (19.8%, up from 15.8%) and a falling share of firms reporting that demand had increased (14.4%, down from 15.6%).^[10]

Business Concerns

• Key business concerns over 2025 have been falling demand and taxation, alongside ongoing cost pressures. BICS data for November show that falling demand for goods and services continues to be the most commonly cited concern by businesses in Scotland (16.9% of businesses), followed by taxation (11%).
• Concern regarding taxation has fallen from its recent peak of 18.0% in April when the increase in employer National Insurance Contributions (NICs) was implemented. However, in November it rose to its highest rate since June, and may be reflecting uncertainty ahead of the UK Budget later in November.

Business Costs

• The RBS Growth Tracker business survey indicated that business input price inflation slowed slightly in October, with the indicator easing back from its five-month high in September. However, it continues to indicate that cost price inflation has sharpened over the past year with businesses citing upward pressures from labour costs, raw material and energy prices.
• Alongside the increase in input costs, the survey indicated that output prices rose at their fastest rate in five months, suggesting some movement by businesses to protect margins in October.^[11]

• However, challenging demand conditions means that not all business are passing through costs. BICS indicators show that the proportion of businesses expecting the prices of their goods and services to rise, has fallen in the second half of the year from its recent peak of 40.3% in May, following the increase in employer NICs, to 12.6% in October and November. 65.1% of businesses expect the price of their goods and services to stay the same while 2.6% expect their prices to fall.
• Labour costs continue to be the most frequently mentioned driver of businesses considering raising prices in November (32.6%), followed by energy prices (19.3%) and raw material prices (13.5%).

Business Optimism

• Despite challenging conditions, the RBS Growth Tracker reported that business optimism for growth over the coming year remained positive in October, albeit that the indicator fell to its lowest level since the start of the year and remains notably lower than during 2024.
• The uncertainty in the demand outlook is also reflected in BICS data for October which indicates that 46.1% of businesses expect their performance to stay the same over the coming year. However, 29.9% expect their performance to increase and there has been a reduction in the share of businesses now expecting their performance to decrease (8.2%) – its lowest share since October last year.