Jessica O'ConnorBusiness investment in Scotland has reached double-digit levels for the first time in two decades, according to the latest CBI–Addleshaw Goddard Scottish Productivity Index.
The annual analysis, launched ahead of the January Scottish Budget and Holyrood elections, signalled progress in areas linked to economic competitiveness but underscores persistent challenges affecting employers’ ability to recruit, train, and retain talent.
Compiled by the Fraser of Allander Institute, the Index reported that business investment has risen to more than 10% of GDP, outperforming the UK overall.
Scotland also leads the UK in higher-level qualifications, with nearly 54% of the working-age population educated to this level.
Sickness absence has fallen close to pre-pandemic norms.
However, long-term health-related economic inactivity remains high at just over 34%, above the UK average of 28.6%.
Workforce training participation has also declined to around 25%, reversing previous gains, and skill-shortage vacancies remain twice as high as in 2011.
The report highlighted additional structural pressures for employers, including weak export performance, low early-stage entrepreneurship and declining business R&D.
These conditions continue to restrict productivity growth and place strain on business operations and workforce capacity.
Michelle Ferguson, director of CBI Scotland, said: “This year’s Index shows that Scotland is not standing still – firms are investing more, digital infrastructure is improving, and we are building on real strengths in education and innovation. But it also underlines that these gains are not yet translating into the step change in productivity our economy needs.
“Too many businesses are still held back by weak export performance, falling levels of workforce training and the growing impact of long-term ill health on participation in the labour market. With a Budget in January and elections to Holyrood next year, firms will be looking to the Scottish Government for decisive moves on tackling economic inactivity, addressing challenges around skills and training as well as boosting exports.”
Deputy First Minister Kate Forbes said: “This report captures important measures that contribute to whole-economy productivity. I am encouraged to see business investment reaching its highest level in 20 years, showing that industry recognises Scotland’s real strengths – one of the UK’s most highly educated workforces, globally significant energy assets, and improving digital and green infrastructure.”
Mairi Spowage, director of the Fraser of Allander Institute, added: “There are some positive signals in the Productivity Index, such as on business investment.
“Many other indicators though underline some of the weaknesses in Scottish drivers of productivity, particularly research and development and the openness of the Scottish economy.
“Policy initiatives have to consider a much wider range of issues than simply economic development or investment if we are to improve productivity of Scottish workers.”
Alan Shanks, head of Scotland at Addleshaw Goddard, said: “Policymakers and business leaders need robust, objective data on key indicators such as investment, innovation, skills and wellbeing to measure progress, identify challenges and target interventions.”
