The report, compiled by Fraser of Allander and sponsored by international law firm Addleshaw Goddard – is being launched today at Addleshaw Goddard’s Edinburgh offices by the deputy First Minister, Kate Forbes.

This year’s report shows progress in business investment, patenting activity, educational attainment, internet speeds, and the expansion of EV charging infrastructure.

But the Index also highlights persistent and structural challenges – especially in exports, entrepreneurship, workforce training, and long-term health outcomes – that continue to constrain Scotland’s productivity and economic potential.

CBI Scotland is launching its business manifesto in January, ahead of the Scottish Parliament elections – which will outline plans to help solve long term economic inactivity, how to upskill the workforce and keeping the momentum on business investment – all to drive productivity and growth in all sectors of the Scottish economy.

Headline findings

• Business investment rose to over 10% of GDP, the first time Scotland has exceeded its long-term trend in 20 years – in contrast to a fall across the UK.
• Scotland leads the UK in higher-level qualifications with almost 54% of the working-age population educated to this level (England 47%, NI 42%, Wales 44%).
• Sickness absence has declined significantly and is now close to pre-pandemic norms.
• However, long-term health-related economic inactivity continues to rise, reaching 34% – higher than England (27%) and Wales (33%), but below Northern Ireland (36%).

The Index assesses Scotland’s performance across key productivity drivers including business investment, exports, R&D, digital infrastructure, skills, and health, compared with other UK nations and international competitors.

The findings in detail show

1. Business practices

   • Business investment rose to over 10% of GDP, the first time Scotland has exceeded its long-term trend since 2005 - contrasting with a decline in the UK overall.
   • But exports dropped sharply to over 20% of GDP, wiping out recent gains and widening the gap with the UK average (31%).
   • Early-stage entrepreneurship remains the lowest among UK nations at 9%, significantly below the UK’s at almost 11%.

2. Research & Innovation

   • Business R&D investment fell to 1.45% of GDP, below both Scotland’s long-term trend and the UK average (1.96%).
   • Innovation-active businesses declined to 32.4%, however this was a lower fall than seen across the UK.
   • But despite a fall in the number of patents granted, Scotland continues to outperform the UK in patents per 100,000 population.

3. Skills and training

   • Scotland continues to lead the UK in higher-level qualifications (53.7% of working-age population). However, the share of the population with no qualifications remains higher than the UK average.
   • Workforce training participation fell significantly to just over 25%, reversing progress seen in recent years.
   • Skill-shortage vacancies declined but remain double 2011 levels, signaling continued structural strain.

4. Health and Wellbeing

   • Sickness absence has fallen sharply (from 3.0% to 2.3%), returning close to pre-pandemic norms. This compares to England’s rate of 2%, with Wales and Northern Ireland both at 2.3%.
   • Yet long-term health-related economic inactivity continues rising, now just over 34%, well above the UK average of 28.6%.
   • This compares to England’s rate (27.4%), Wales (33.8%) and Northern Ireland (36.1%).

5. Infrastructure and connectivity

   • Scotland has seen a rapid rise in average internet speeds, though still trailing the UK. Full-fibre access continues to expand, reaching 61% of premises.
   • 4G and 5G coverage improved, but Scotland remains well behind other UK nations.
   • Scotland now has 108 EV charging devices per 100,000 people, well above the UK average.

Michelle Ferguson, director, 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.”

Ms Ferguson added: “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.

“If we want higher growth, better wages and improved living standards, we need a plan of action which delivers. Scotland has all the ingredients for success; a highly educated workforce and strong business investment – the task now is to bring them together at pace and at scale.”

Deputy First Minister Kate Forbes said: “This report captures important measures that contribute to whole-economy productivity. Despite challenging economic headwinds, since 2007 Scotland’s productivity has grown at an average rate of 0.9% per year compared to the UK average of 0.3%.

“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.

“The Scottish Government is driving a new national and regional approach to skills planning and our Programme for Government provides certainty for businesses to scale and grow by supporting entrepreneurs, boosting planning capacity and reducing regulatory complexity and costs.”

Mairi Spowage, director, the Fraser of Allander Institute at the University of Strathclyde, said: “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.”

She continued: “Whilst there are significant and ongoing challenges with the reliability of labour market data, which poses problems for policy makers, we have known for many years that the Scottish workforce has higher levels of inactivity due to illness or disability.

“This means that 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: “The CBI & Addleshaw Goddard Scottish Productivity Index is a significant piece of work which can inform the decisions that must be made to improve the country’s productivity growth, and we are delighted to support it.

“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.

“Collaboration between business, academia, and government is essential, and this evidence-based approach will help us focus our collective efforts where they will have the greatest impact for Scotland’s future.”