Sentiment tracked by ICAEW’s Business Confidence Monitor (BCM) for Q4 2025 found that Confidence in Scotland decreased for the sixth consecutive quarter in quarter four (Q4) 2025, from -0.5 in the previous quarter to - 12.7. It is the weakest confidence reading since Q4 2022 and below the UK average.

As in the rest of the UK, Scottish firms identified the tax burden as the biggest growing challenge. A record high of 68% of respondents said that the tax burden was holding back confidence, again as a result of pre-Budget speculation and tax increases such as employer’s national insurance contributions.

Regulatory requirements have also been a significant challenge for Scottish businesses, with 42% flagging it as an issue. Ahead of the Scottish elections in May, more than one in five businesses cited the lack of government support as an issue.

Scotland experiences the weakest annual domestic sales growth in the UK during Q4 2025, at just 1%. Scottish manufacturing and engineering have experienced a slowdown as the economy has declined. It is likely to improve in 2026, albeit at a slower pace than other nations in the UK.

Export growth was also relatively weak in Scotland; businesses reported no growth in Q4 2025. US tariffs on goods such as whisky may have contributed to this, with the sector heavily reliant on US exports. It is expected to increase by 1.8% in 2026 – again, one of the lowest projections for exports in the UK.

“It’s concerning that business confidence in Scotland has slipped to its lowest point in more than three years as the pressures of tax, political uncertainty and slowing economic activity take their toll,” David Bond, ICAEW Director for Scotland, said. “Scottish businesses are dealing with rising costs, weak sales growth and declining investment intentions, all of which are undermining their ability to plan and grow."

He urged the governments in Edinburgh and Westminster to focus on creating better conditions for Scottish businesses to enable them to unlock their potential.

Across the UK, business confidence in the UK sank into double-digit negative territory for the first time in three years, from -7.3 to -11.1 in Q4, amid unprecedented fears over the tax burden and weaker activity.