Scotland's Economy to Outperform UK in 2026 with Boost from India Trade Deal

Strategic Insights -

Economic growth in Scotland is expected to outpace the UK as a whole next year, driven by the recently signed free trade deal with India. KPMG's European Economic Outlook forecasts a 1.2% increase in Scotland's gross domestic product (GDP) in 2026, surpassing the 1.1% growth predicted for the wider UK. The accountancy firm has cited the new trade deal as a key factor in the Scottish economy's optimism, particularly for businesses in the whisky and gin sectors, which will see tariffs reduced on exports to India.

Key Takeaways:

  • Scotland's GDP is expected to increase by 1.2% in 2026, outpacing the 1.1% growth predicted for the UK as a whole.
  • The new UK-India free trade deal will reduce tariffs on imports of whisky and gin from 150% to 75%, before being cut to 40% by the tenth year of the agreement.
  • KPMG has forecast a 1% increase in Scottish GDP in 2025, below the 1.2% growth predicted for the UK.
  • Rising input costs and sustained inflationary pressures have been identified as challenges facing the Scottish economy in 2025.
  • Consumer confidence has weakened in Scotland, with the April Scottish Consumer Sentiment Indicator falling to its lowest level since the middle of 2023.
  • Scottish businesses, particularly in the food and drink and manufacturing sectors, are expected to benefit from new agreements with key export partners.
  • KPMG's chief economist, Yael Selfin, has emphasized the importance of a more stable economic climate for Scottish firms, with inflation expected to fall back to target and interest rates likely to ease.

Statistics:

  • Scotland's GDP is expected to increase by 1.2% in 2026.
  • The UK's GDP is expected to increase by 1.1% in 2026.
  • The UK-India free trade deal will reduce tariffs on imports of whisky and gin from 150% to 75% in the first year, before being cut to 40% by the tenth year of the agreement.
  • Scottish GDP expanded by 0.4% in the first quarter of 2025, compared to 0.7% for the UK as a whole.
  • The Scottish Consumer Sentiment Indicator fell to its lowest level since the middle of 2023 in April.
  • The UK economy contracted by 0.3% month-on-month in April, with manufacturing activity pulling back sharply.

Sources:

  • KPMG's European Economic Outlook
  • The Financial Times: "Scotland's economy to outperform UK in 2026, says KPMG"
  • BBC News: "Scotland's economy 'well placed' for growth, says KPMG"
  • The Scotsman: "Scotland's GDP growth forecast to beat UK in 2026, says KPMG"