Scottish Business Monitor, 2025 Q1

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Suri, Sanjam and Hampson, Josh (2025) Scottish Business Monitor, 2025 Q1. Fraser of Allander Institute, Glasgow.

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Abstract

Scottish businesses are raising prices and hiring fewer staff in response to growing financial pressures as a result of the increase in employer National Insurance Contributions (NICs), according to the Fraser of Allander Institute at the University of Strathclyde. The latest edition of its quarterly Scottish Business Monitor revealed that almost nine out of 10 of 250 businesses surveyed in March anticipate higher business costs over the next six months, while 80% expect Scottish economic growth to remain “very weak to weak”. The report also found that eight out of 10 businesses report increased payroll costs as a result of rise in employer NICs with many adapting to this through a combination of strategies: cutting back on hiring or cancelling increases in their workforce, adding the extra costs on to prices, and reducing employee benefits and compensation packages. Price increases in response to the rise in employer NICs have the potential to trigger higher-than-target inflation, something that has been flagged as a concern by the Bank of England policymakers as well. The recent changes to NICs are expected to heavily impact business planning this year; four in five businesses surveyed said these changes have increased their overall payroll costs. Business sentiment has also been affected by the uncertainty around trade and tariffs, with firms indicating that economic and policy uncertainty was more important than credit availability or staff availability.

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