Tourism supports Scotland’s economic growth as optimism improves
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.”