Call for ‘plan of action’ to boost Scottish productivity ahead of Holyrood election - CBI Scotland

Releasing its latest Scottish Productivity Index today, business body CBI said it was issuing a “clear call for all political parties to make 2026 the year Scotland gets its economy firing on all cylinders”.

Now in its sixth year, the index, compiled by the University of Strathclyde’s Fraser of Allander Institute and sponsored by legal firm Addleshaw Goddard, highlights progress in business investment, patenting activity, educational attainment, internet speeds, and the expansion of EV charging infrastructure.

But the study also points to “persistent and structural challenges”, particularly in exports, entrepreneurship, workforce training and long-term health outcomes, that continue to constrain rates of productivity and “economic potential”.

Among the report’s key findings, business investment was found to have risen to more than 10 per cent of gross domestic product (GDP) - a measure of total economic output. It is the first time Scotland has exceeded its long-term trend in 20 years, in contrast to a fall across the UK as a whole.

Meanwhile, sickness absence north of the Border is said to have declined significantly and is now close to pre-pandemic norms. However, long-term health-related economic inactivity continues to rise, reaching 34 per cent - higher than England (27 per cent) and Wales (33 per cent), but below Northern Ireland (36 per cent).

The index assesses the nation’s performance across key productivity drivers including business investment, exports, research and development (R&D), digital infrastructure, skills and health, compared with other UK nations and international competitors.

Michelle Ferguson, director of CBI Scotland, said: “This year’s index shows that Scotland is not standing still - firms are investing more, digital infrastructure is improving, and we are building on real strengths in education and innovation. But it also underlines that these gains are not yet translating into the step change in productivity our economy needs.

“Too many businesses are still held back by weak export performance, falling levels of workforce training and the growing impact of long-term ill health on participation in the labour market.

“With a [Scottish] Budget in January and elections to Holyrood next year, firms will be looking to the Scottish Government for decisive moves on tackling economic inactivity, addressing challenges around skills and training as well as boosting exports.

“If we want higher growth, better wages and improved living standards, we need a plan of action which delivers. Scotland has all the ingredients for success; a highly educated workforce and strong business investment - the task now is to bring them together at pace and at scale,” she added.

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CBI Scotland said it would be launching its pre-election manifesto in January, which will outline plans to help solve long-term economic inactivity, how to upskill the workforce and keep the momentum on business investment.

According to the latest index, Scotland leads the UK in higher-level qualifications with almost 54 per cent of the working-age population educated to this level (England sits at 47 per cent, Wales 44 per cent and Northern Ireland 42 per cent).

Despite the positive news on business investment levels, exports dropped sharply to some 20 per cent of GDP, wiping out recent gains and widening the gap with the UK average (31 per cent). Early-stage entrepreneurship in Scotland remains the lowest among UK nations at 9 per cent, below the UK-wide level of almost 11 per cent.

Business R&D investment fell to 1.45 per cent of GDP, below both Scotland’s long-term trend and the UK average (1.96 per cent). Despite a fall in the number of patents granted, Scotland continues to outperform the UK in patents per 100,000 of the population.

Scotland has also seen a rapid rise in average internet speeds, though still trailing the UK. High-speed, full-fibre access continues to expand, reaching 61 per cent of premises. Scotland now has 108 electric vehicle (EV) charging devices per 100,000 people, well above the UK average.

Mairi Spowage, director of the Fraser of Allander Institute, said: “There are some positive signals in the productivity index, such as on business investment. Many other indicators underline some of the weaknesses in Scottish drivers of productivity, particularly research and development and the openness of the Scottish economy.

“Whilst there are significant and ongoing challenges with the reliability of labour market data, which poses problems for policy makers, we have known for many years that the Scottish workforce has higher levels of inactivity due to illness or disability. This means that policy initiatives have to consider a much wider range of issues than simply economic development or investment if we are to improve productivity of Scottish workers.”

Alan Shanks, head of Scotland at Addleshaw Goddard, added: “The CBI and Addleshaw Goddard Scottish Productivity Index is a significant piece of work which can inform the decisions that must be made to improve the country’s productivity growth, and we are delighted to support it.”

Deputy first minister Kate Forbes said: “I am encouraged to see business investment reaching its highest level in 20 years, showing that industry recognises Scotland’s real strengths - one of the UK’s most highly educated workforces, globally significant energy assets, and improving digital and green infrastructure.

“The Scottish Government is driving a new national and regional approach to skills planning and our Programme for Government provides certainty for businesses to scale and grow by supporting entrepreneurs, boosting planning capacity and reducing regulatory complexity and costs.”

The solutions for Scotland’s productivity puzzle are clear