First Minister John Swinney 'worried' about the Scottish economy's future - and here's why

John Swinney says Labour’s ‘tax on jobs’ risks job cuts and business closures.

First Minister John Swinney says he is worried about the future of the economy and has warned Scottish jobs may be at risk.

His deputy Kate Forbes also says she is “deeply concerned” about a predicted fall in business activity over the first three months of next year.

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Their concerns were voiced as Chancellor Rachel Reeves described the “challenge” of fixing the economy as “huge”, after revised official figures showed the UK economy flatlined in the third quarter of the year.

The Office for National Statistics (ONS) said on Monday that UK gross domestic product (GDP) showed no growth between July and September, with the figures released after it was confirmed last week that inflation had risen at its fastest pace for eight months.

First Minister John Swinney.First Minister John Swinney.
First Minister John Swinney. | Andy Buchanan/Press Association.

Mr Swinney said Labour’s “tax on jobs” was the “wrong step” and would ultimately halt economic growth going forward.

Speaking to The Scotsman, he said: “I’m worried about the prospects for the economy. The statistics we’ve just received are worrying, and that of course comes before the effect of the UK Budget, which is essentially to put a tax on jobs with the increases to employers’ National Insurance contributions.

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“I have been clear for some time now that I think it is the wrong step for the UK government to take because it makes the cost of employment more expensive.”

His warning comes after UK Hospitality Scotland told The Scotsman there would continue to be job cuts and business closures in coming months because of the increases to employer National Insurance contributions.

When asked if he also thought job cuts would transpire, Mr Swinney said: “I think the risk is there that that will happen. Obviously anything that makes the cost of employment greater is something that would cause me concern.”

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In the UK Budget in October, Ms Reeves hiked employer National Insurance contributions to 15 per cent and lowered the threshold at which employers must start paying these contributions to £5,000.

Chancellor Rachel Reeves.Chancellor Rachel Reeves.
Chancellor Rachel Reeves. | Dan Kitwood/Getty Images

The move is expected to boost the Treasury’s coffers by £25 billion.

Ms Reeves said in a statement on Monday: “The challenge we face to fix our economy and properly fund our public finances after 15 years of neglect is huge. But this is only fuelling our fire to deliver for working people.

“The Budget and our plan for change will deliver sustainable long-term growth, putting more money in people’s pockets through increased investment and relentless reform.”

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Mr Swinney said he was “confident” measures his SNP Government were taking in the 2025/26 Scottish Budget would support economic growth north of the Border.

He said: “We are going as far as we can in terms of the range of interventions that we’re making. We’re also coupling that with a real strong upsurge in investments for resources within the Budget through the Scottish National Investment Bank, enterprise agencies and then a big increase in housing investment, which I think will have a significant impact on the budget.

“I am confident those factors will work together to support economic growth.”

ONS statisticians previously estimated 0.1 per cent growth for the third quarter this year, and have partly blamed the reduction on fresh survey data showing weaker trading across bars and restaurants. The body also revised down its growth reading for the second quarter of 2024 to 0.4 per cent - it previously predicted an increase of 0.5 per cent, which itself was a reduction on previous estimates.

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This comes after the Confederation of British Industry warned there would be a fall in business activity in the first three months of 2025.

Deputy First Minister Kate Forbes.Deputy First Minister Kate Forbes.
Deputy First Minister Kate Forbes. | Jeff J Mitchell/Getty Images

Ms Forbes said she was “deeply concerned”, adding: “Increased National Insurance employer contributions are already bringing damaging consequences for businesses across Scotland, and there is no doubt the UK government Budget has impacted activity over the last few months and will continue to influence business decision making.

“The Scottish Government has unveiled a Budget for economic growth, which includes allocating over £320 million for enterprise agencies to attract, start and support businesses and providing a further £200m to the Scottish National Investment Bank to create jobs and attract investment.”

HM Treasury has been approached for comment.

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