The silent crisis undermining our economy - Susan Murray

The Understanding Scotland Economy Tracker shines a light on the people behind the economic numbers and it paints a sobering picture. Despite marginal improvements in the economy’s headline indicators, the lived reality for many Scots is worsening. This disconnect is not just a social tragedy; it is an economic time bomb.

Nearly half of all Scots report their financial situation has deteriorated over the past year. Even more alarming is the fragility beneath these numbers: 44 per cent could not cover a £500 emergency without borrowing. For households with children, that figure rises to a staggering 59 per cent. Financial insecurity on this scale is not a peripheral issue. It is the undercurrent shaping consumer behaviour, health outcomes and ultimately, the long-term prosperity of the nation.

The economic impact is multifaceted. First, there’s the immediate drag on consumption. Half of Scots continue to cut back on non-essential spending and energy use. Retail, hospitality, entertainment - sectors that rely on discretionary income - are facing the realisation that spending patterns are not going to return previous levels. A consumer economy cannot thrive when so many are relying on overdrafts and credit to survive day to day.

There’s the deeper cost to human capital. Financial stress is eroding wellbeing: sleep is lost, mental health deteriorates, diets worsen. According to the Tracker, women, young people and ethnic minorities are bearing the brunt. These are not only health statistics - they are economic liabilities. A stressed and undernourished workforce is a less productive one.

When 95 per cent of respondents agree that people are less effective at work when they’re not eating or sleeping well, we must ask: how long can we afford to ignore this? Moreover, financial precarity is stalling economic mobility. Nearly half of respondents are not confident they could secure a new job within three months. This lack of mobility dampens innovation, reinforces inequality and inhibits the dynamism modern economies rely on. It also reduces resilience: when people can’t afford to take risks, fewer start businesses, retrain or relocate for opportunity.

And here lies the real risk: financial precarity is no longer a marginal issue affecting only a small number of the very poorest in our society. It is systemic. It is creeping up the income ladder, hollowing out stability and feeding the growing pessimism about the country’s direction. The idea of growth leading to a trickle-down of wealth is far from people’s lived reality. With 70% of Scots expecting economic conditions to worsen, confidence - a vital economic lubricant - is drying up.

The remedy is not a singular policy but a shift in priorities. It begins with recognising financial security not just as a social good but as an economic imperative. That means raising wages to meet basic needs, strengthening the social safety net, and ensuring access to affordable essentials like housing and childcare.

Economic growth built on unstable foundations will always be vulnerable to the next crisis in the road ahead. Until we treat financial precarity as the core threat it is, we risk just talking about a recovery that never truly arrives.

Susan Murray, Director, The David Hume Institute