Scotland is predicted to be one of the UK’s slowest-growing regions over the next three years, and could fall behind the national average according to the EY’s 2025 Regional Economic Forecast. 

While all areas of the UK are set to see steady economic growth over the next three years, London and the East of England (both 1.7%) are the only two areas expected to grow at a faster pace than the UK average, with the slowest rates of gross value added (GVA) growth expected in Scotland (1.4%) and the North East of England (1.3%).

According to EY, Aberdeen is forecast to see the slowest GVA growth in the UK between 2025 and 2028 at just 0.9%, and is the only location over the period where average annual GVA growth is expected to be below 1%.

The report suggests that without significant intervention, the Scottish city is expected to miss out on the pace of growth in professional services seen elsewhere, and will see its local mining and quarrying sector, which is focused on dwindling North Sea oil production, decline by an average annual rate of 0.1% over the next three years.

Dundee is also facing a slower rate of growth, at just 1.2%, with EY claiming a pattern in poorer performing cities being held back by having a larger concentration of lower achieving sectors.

Elsewhere in Scotland, however, the outlook is brighter. Strong growth is expected in information & communication activities in Stirling (1.4%), while employment in professional, scientific and technical activities is expected to grow on average by 1.9% in Edinburgh, while Glasgow is expected to see GVA growth of 1.6% and employment growth of 0.8%. 

According to the forecast, knowledge-intensive industries are expected to be among the UK’s fastest-growing sectors over the next three years, with information and communication (which involves technology-led activity) as well as professional, scientific and technical activities expected to achieve average annual GVA growth of 2.6% and 2.2% respectively. 

Employment in professional, scientific and technical activities is forecast to grow by an average annual rate of 1.6% between 2025 and 2028, more than double the economy-wide employment growth rate of 0.7%.

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The forecast attributes the strength of these sectors largely to the rush of activity around AI, however, after assessing existing UK substations based on ‘demand headroom’, or their capacity to accommodate fluctuations in electricity consumption, EY found that the majority of substations are not equipped to accommodate hyperscale data centres, with only four out of 4,000 UK substations possessing the minimum demand headroom of over 100 megawatts.

Notably, three of these four substations are located in London, with the fourth located in the West Midlands, with the report urging the UK Government to invest more in the country’s energy and grid infrastructure in order for the benefits of AI to be felt across the national economy.

“The UK is forecast to make a welcome return to steady growth this year, but the varied mix of sectors around the country means that some areas will feel that uplift more than others,” said Rohan Malik, EY’s UKI managing partner for government and public sector.

“Technology and professional services are expected to feature in the UK’s upcoming Industrial Strategy, with the hope that these sectors will support economic momentum.

“Our analysis shows that these knowledge-intensive sectors are set to generate a wave of new and lucrative job opportunities, even as the wider UK labour market remains relatively flat. The challenge for policymakers will be how to foster growth in areas most in need.”