Scotland to see slowest GVA of 1.4% between 2025 and 2028

Scotland is expected to see the slowest Gross Value Added (GVA) growth at 1.4% among
the devolved administrations, while all regions of the UK are expected to see steady economic growth over the next three years, according to the EY 2025 Regional Economic Forecast.

Although Scotland is ahead of the North East of England, which is forecasted to grow at just 1.3%, its 2025 employment growth is anticipated to be even slower, at 0.4%, compared with the UK average of 0.5%.

Among Scottish cities, Aberdeen is projected to trail behind with average annual GVA growth of only 0.9% over the next three years due to a contraction in the energy sector and limited growth in professional services, as a result.

Aberdeen is the only UK city expected to see less than 1% growth from 2025 to 2028, making it the lowest performing city in the UK. Aberdeen is also forecast to experience negative household income growth averaging -0.4% from 2025 to 2028.

This decline is in stark contrast to some other cities where growth in household income is projected to remain relatively strong, including Belfast (1.8%), Manchester (1.5%) and Bristol (1.5%).

However, Edinburgh stands out with a robust forecast for GVA growth in knowledge-intensive sectors, particularly professional, scientific, and technical activities, which are expected to grow by an average 1.9% annually.

These sectors are significant drivers of GVA growth, contributing to Edinburgh’s overall economic resilience. Glasgow is also expected to see GVA growth of 1.6%, with employment growth predicted to be 0.8%.

The UK overall is expected to see annual average Gross Value Added (GVA) growth of 1.6% between 2025 and 2028 as the combined impact of rising real wages, falling inflation and interest rate reductions help the economy start to build towards the end of this year.

London and the East of England are both forecast to achieve annual GVA growth of 1.7% between 2025 and 2028. Close behind are the South East, the South West and Northern Ireland, which are all forecast to match the UK’s pace with annual GVA growth of 1.6% between 2025 and 2028.

The next 12 months are expected to show a similar disparity. A weaker than expected end to 2024 and persistent inflation are forecast to weigh on the UK’s economic momentum, with national GVA growth predicted to be just 1% in 2025.

London is the only part of the UK expected to outpace the national average with 1.3% GVA growth over the next 12 months.

The South East, the East of England and Northern Ireland are forecast to match the UK average this year, while every other part of the UK is expected to lag behind. The regions with slowest GVA growth over the next 12 months are forecast to be the North East (0.5%) and the West Midlands (0.6%).

Peter Arnold, EY UK chief economist, said: “The years since the global pandemic have seen a two-speed economy emerge in the UK between knowledge-based industries and more consumer-facing sectors.

“While tech and professional services have recovered well and are around a fifth larger than they were pre-pandemic, sectors like hospitality and retail have struggled due to elevated energy and labour costs. It’s perhaps no surprise that locations with higher concentrations of these knowledge-based businesses are therefore expected to see higher levels of growth and employment.”

He added: “Northern Ireland’s economy is expected to expand over the forecast period with its mix of retail, services, healthcare, manufacturing and construction helping it outpace the growth of other devolved administrations. In contrast, Scotland’s distinct sector mix and heavy concentration of energy-related businesses is expected to result in subdued growth over the next three years due to lower levels of North Sea oil production.”