Call for ‘decisive’ action after Scotland’s productivity found by CBI-Fraser of Allander report to again lag rest of UK

“Discussions around our country’s potential have gone on for far too long.”

Businesses and the Scottish and UK governments must collaborate to “unlock investment, build sustainable growth, and help Scottish firms achieve success globally”, after productivity north of the Border was found to have again lagged behind the country as a whole, according to an influential report published today.

The latest version of the annual CBI-Fraser of Allander Scottish productivity index, which comes just ahead of the Spring Budget tomorrow, has revealed that Scotland ranked behind the rest of the UK in ten of 13 key indicators.

However, it saw signs giving cautious optimism for the Scottish economy as it continues to recover from macroeconomic challenges, and flagged areas where the nation punches above its weight, for example boasting the highest percentage of working-age population with higher education certificates or above, at 50 per cent, surpassing the UK average of 43.5 per cent. On a less positive note, it said the percentage of economic inactivity due to long-term sickness remained the highest of all the four nations at 31.7 per cent between October 2022 and September 2023.

Tracy Black of the CBI says: 'Now is the time to take decisive action as the window narrows on Scotland’s target of achieving net zero by 2045.' Picture: Bill Murray/SNS Group.

Mairi Spowage, director at the Fraser of Allander Institute at the University of Strathclyde, said that despite improvements in the “openness” of the economy over the last two years, Scotland’s productivity (an issue recently cited as a key priority for Scottish Enterprise as well as firms north of the Border) is still lagging the rest of the UK’s, “mainly down to the strength of London and the Southeast of England”.

She added: “There’s still plenty of work needed to improve workforce health, with the indicators suggesting a worsening of the situation with regard to sickness absence and inactivity in the last year. A key plank of the National Strategy for Economic Transformation (NSET) is on getting people back into the jobs market via investment in employability programmes. However, despite a ten-year strategy, NSET is already being reviewed and refreshed. Some of the investment needed to support people back into work has often been subject to in-year budget cuts in the last two years, which means it has not materialised.”

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Tracy Black, chief strategy officer and devolved nations and regions ambassador at the CBI, which represents 170,000 businesses, said: “Discussions around our country’s potential have gone on for far too long – now is the time to take decisive action as the window narrows on Scotland’s target of achieving net zero by 2045. With the Spring Budget tomorrow and a general election looming, it is right to move beyond talking about ambitious goals and to take swift action before time runs out.”

She also said the index showed a decrease in business research and development spending as a percentage of Scottish gross domestic product, down to 1.8 per cent in 2021 from 1.9 per cent in 2020. “Scottish firms must look at how they can embrace productivity through innovation and technology,” Black added.

“Scotland has a highly educated workforce. We need to make sure they are contributing to sustainable economic growth by cultivating leadership skills, enhancing digital proficiency, and integrating new technology. We must also provide chances for Scotland’s workforce to upskill and retrain for new industries as we make the switch to net zero, which will improve wages, job security, and enhance productivity.”