Why Scots' growing pessimism is a bigger problem than you might think – Susan Murray
A lack of confidence in the future has a very real economic cost, explains Susan Murray of the David Hume Institute
For the first time in nearly three years, the cost of living has overtaken healthcare and the NHS as the issue Scots are most concerned about. At one level, that may not seem surprising. Prices remain high, household budgets are stretched and many families are still adjusting to years of economic instability.
But the findings from the latest Understanding Scotland Economy Tracker point to something deeper than concern about inflation alone. They reveal a public mood that is becoming increasingly pessimistic about the future of the economy, increasingly anxious about financial security, and increasingly doubtful that living standards will improve. That matters because public confidence is not simply a political issue. It is an economic indicator in its own right.
When households become more cautious, consumer behaviour changes. Spending slows. People defer purchases, reduce leisure activity, save less and retreat from financial risk. In turn, businesses feel the effects through weaker demand, reduced investment confidence and slower growth.
Scots are cutting back on spending
Our latest tracker data suggests Scotland may be entering precisely that kind of cycle. More than three-in-four Scots now believe the economy is worse than it was a year ago. Nearly three quarters expect conditions to deteriorate further over the next 12 months. More than half say their own personal finances have worsened.
These are not marginal shifts in sentiment. They represent a sharp deterioration in confidence since the beginning of the year.
What is striking is that these concerns are now shaping everyday behaviour across Scottish society. More than half of respondents say they have cut back on leisure activities and reduced non-essential spending because of concerns about money. Nearly one in two say they are saving less than usual, while more than two in five are dipping into savings to cope with rising costs.
This is important because consumer spending remains one of the main drivers of economic activity. When households begin retrenching, the effects ripple across sectors – from retail and hospitality to tourism and local services.
At the same time, the survey points to growing fragility beneath the surface of the labour market and household finances. Fewer than half of Scots are confident they could find another job within three months if necessary. Confidence in being able to cope with higher housing costs has also weakened over the past year.
And yet while economic pessimism is deepening, there remains strong support for the idea that society should collectively protect people from economic hardship. Nearly four-in-five Scots agree that it costs the public purse more in the long run when people cannot meet their basic needs today. More than two thirds believe we have a collective responsibility to provide a safety net during hard economic times.
In many ways, this points towards an increasingly important debate for Scotland’s new parliament and ministers: what should public spending do?
Deeply practical economics
Too often political debate focuses narrowly on the size of immediate budget pressures – the so-called “black holes” that dominate headlines. Of course fiscal discipline matters, particularly within the constraints of the Scottish Government’s balanced budget requirements. But the public appears increasingly aware that failing to invest early can create greater social and economic costs later.
Preventative spending is sometimes portrayed as an abstract policy concept. In reality, it is deeply practical economics and an essential tool to manage future risk.
If people cannot afford adequate housing, nutritious food or heating, pressure increases elsewhere in the system – particularly on health services, employability, justice and social care. If young people struggle with poor mental health linked to financial insecurity, workforce productivity suffers. If families cannot access stable childcare, labour market participation declines.
These costs do not disappear because they are excluded from a budget line. They simply emerge elsewhere, often at greater expense.
There are important lessons here for both policymakers and business leaders. For government, the findings suggest that economic credibility will increasingly depend not only on managing public finances, but on demonstrating how policy decisions improve living standards and financial resilience in tangible ways. Public concern is now rooted less in abstract macroeconomics and more in the realities of everyday affordability.
Lessons for employers
For businesses, there is also a strategic challenge. Consumer confidence cannot be separated from economic growth prospects. Nor can workforce wellbeing be separated from productivity and competitiveness. Employers are operating in an environment where many workers remain financially vulnerable, despite low unemployment rates by historical standards.
This means conversations about fair pay, workforce security, skills and wellbeing are no longer peripheral social issues. They are central economic questions.
The findings also reveal generational differences that should not be ignored. Younger Scots are significantly more likely to cite the cost of living as a defining issue and more likely to report mental health impacts linked to money worries. That has long-term implications for Scotland’s economic future if financial insecurity becomes embedded early in adult life.
None of this means Scotland is uniquely pessimistic. Many advanced economies are wrestling with similar pressures following years of inflation shocks, geopolitical instability and slow productivity growth.
The challenge for Scotland’s leaders – political and business alike – is whether they can rebuild confidence in a way that goes beyond short-term headlines and begins restoring belief in long-term resilience and opportunity.
Because ultimately, economies are not driven by spreadsheets alone. They are driven by whether people feel secure enough to spend, invest, work, innovate and plan for the future. At the moment, many Scots do not feel that security exists.
Susan Murray is director of the David Hume Institute
Comments
Want to join the conversation? Please or to comment on this article.