Business confidence in Scotland
ICAEW’s Business Confidence Monitor shows Scotland’s Business Confidence Index fell further into negative territory in Q4 2025, dropping to -12.7, its lowest level since Q4 2022.
Scottish businesses report the tax burden as their primary challenge and have the softest expected rise in capital expenditure of any UK region.
While sentiment for the UK turned negative in Q4 2024, Scotland had remained positive until Q3 2025. It is now below the UK average of -11.1, underlining the urgency of restoring confidence.
For Scottish businesses to thrive, it must become less complex, less costly, and more certain to do business in Scotland.
What we're asking of policymakers
Ahead of the election, and throughout the next parliament, ICAEW Scotland encourages policymakers to focus on how to drive economic growth and create jobs and opportunities by:
- Engaging early with the business and finance profession.
- Evaluating policy proposals against real-world delivery and investment decision-making.
- Collaborating on implementation, recognising the importance of execution as well as intent.
ICAEW Scotland can provide:
- Evidence and insight from across sectors and regions.
- Practitioner input on tax, regulation, public finances and business behaviour.
- A trusted forum for constructive and evidence based dialogue.
Improve productivity and long-term growth prospects
Scotland’s productivity gap remains a fundamental constraint on growth, wages, and public finances. Our members experience that:
- Incentives for long-term capital investment are disjointed, including for productivity-enhancing equipment and systems.
- Leadership and management of SMEs are often too tied up to focus on growth. Their central contribution to Scotland’s economy is not matched by a regulatory environment that is proportionate to their needs.
- Stronger cross-sector coordination is insufficient; productivity is a long-term, economy-wide challenge.
Delivery depends on pace, skills and investment confidence. Productivity is not solely a tech issue: leadership capability, workforce engagement and investment conditions are equally critical.
A stable policy environment that allows businesses to retain value, reinvest and reward staff fairly is essential to sustained productivity improvement.
Recommendations
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1. Strengthen and accelerate productivity ambitions
Establish clear Scottish productivity objectives aligned to the UK Industrial Strategy and Scotland’s own economic priorities, focusing support on Scotland’s highest-potential growth sectors and their supply chains.
Economy-wide action should be coordinated and monitored to boost management capability, technology adoption, investment, skills and regional delivery.
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2. Support SME competitiveness
Ensure regulation is proportionate for SMEs and undertake comprehensive assessments to understand business burden and any potential unintended consequences.
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3. Ensure non-domestic rates better support competitiveness and growth
In the context of ongoing debate in Scotland about the current non-domestic rates (NDR), there is an opportunity to strengthen how it supports investment and economic growth. This could include improving the visibility, accessibility and practical operation of existing reliefs.
Accelerate skills, AI and technology adoption
Digital and AI adoption increasingly determine competitiveness across all sectors, but many SMEs face barriers relating to cost, skills and access to trusted advice. Members tell us that:
- AI and digital skills development is lagging and lacks focus on strategic growth sectors.
- SMEs often struggle to access trusted advice on digital and AI tools locally, slowing adoption.
Policy should focus not only on innovation but on diffusion too, ensuring the benefits of technology are felt across regions, sectors and firm sizes, making it more cost effective for SMEs.
Recommendations
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4. Extend support for technology adoption in high-growth sectors
Expand support for technology adoption, particularly for businesses with high growth potential in priority sectors. This could draw on best practice and comparable programmes across the UK, ensuring any approach is tailored to Scotland’s economic context.
Schemes should be designed with strong, consistent business engagement to inform their coverage, accessibility and performance. Supporting technology adoption in sectors such as professional services can also help build local expertise, strengthening wider support for SMEs and driving broader economic benefit.
Unlock private and institutional investment
Private and institutional capital will be critical to delivering Scotland’s ambitions in energy transition, infrastructure, housing and innovation. Investors consistently cite policy stability and regulatory clarity as decisive factors. Members tell us that:
- Tax and regulation are too complex, creating unnecessary administrative burdens.
- Policy signals are unpredictable, lacking the consistency needed for patient, long-term investment.
- Public institutions could play a more coordinated role in crowding-in private capital, particularly in strategically important sectors.
Recommendations
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5. Enhance existing investment project pipeline information
Boost visibility of the investment pipeline for priority sectors and infrastructure, with clear information on project stage, financing requirements, delivery milestones and public support.
This would improve transparency, support due diligence and help to crowd in private and institutional investment.
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6. Amplify the role of public financial institutions in crowding in private capital
Scottish public finance and economic development institutions could further collaborate on sector delivery plans for Scotland’s priority growth areas to drive investment.
Enable the clean energy transition and sustainable growth
Scotland has significant strengths in renewable energy and the wider clean economy, and there are major opportunities to catalyse growth. There are also significant issues to address but:
- Policy direction on net zero and the circular economy has been unstable and short-term.
- Planning and consenting for renewable and infrastructure projects has been too complex.
- Institutions that catalyse private investment in clean energy have lacked stable backing.
Recommendations
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7. Introduce fast-track planning route and a coordinated consent process
Introduce a fast-track planning route and a coordinated consenting process for nationally significant clean energy and industrial decarbonisation projects. The route should have clear eligibility criteria, application standards and an accountable case process lead.
Public confidence should be supported by reporting at case-level alongside an annual performance report, subject to proportionate independent assurance. Transparency should be given that the route is meeting due process requirements and genuinely reducing delays.
Promote sectoral strengths and regional opportunity
Scotland’s economic future will be driven by a diverse set of high-value sectors, which can have the potential for significant scale-up, including the energy transition, financial and professional services, advanced manufacturing, life sciences and digital services. Regional conditions need to improve to better support clusters of specialisms. Our members tell us that:
- Skills pipelines often misalign with sector needs.
- Innovation clusters could do more to link business, academia and investors.
- Regions often adopt a ‘one- size-fits-all’ approach, rather than building on existing sector strengths.
Recommendations
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8. Support regional development and strengthen Regional Economic Partnerships
We support regional devolution as a means of driving economic growth, creating jobs and expanding opportunity across Scotland.
In that context, Regional Economic Partnerships should be further strengthened as key delivery vehicles. Establishing a clear national framework for their role, governance and reporting would improve accountability while maintaining the flexibility needed to respond to regional priorities.
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9. Bolster the role of existing regional skills planning arrangements
Each region should work closely with employers, education providers and professional bodies on skills and apprenticeships delivery plans.
Delivery plans should include transparent targets and annual reporting on apprenticeship starts, completions, higher-level pathways and progression into employment, including in professional occupations such as accountancy.
