Scotland’s service economy is back in growth mode, with fresh data showing a sharp rebound in business activity during June and renewed optimism for the year ahead.
The Royal Bank of Scotland Growth Tracker’s mid-year analysis points to a sector that has weathered spring’s softer spell and is now benefiting from buoyant consumer spending, global demand for tech services, and—yes—even a burst of unseasonably warm weather.
Service Sector Back in the Fast Lane
June’s numbers weren’t just good—they were the joint-strongest monthly output growth in seven months. That’s a clear sign momentum has shifted after a slow patch earlier in the year.
Business confidence is also ticking higher. In fact, optimism has now improved for three straight months, hitting its highest level since October 2024.
The gains were broad-based, but not evenly distributed. Travel, tourism and leisure, along with business services, led the charge. The latter even broke an eight-month streak of declining activity.
Travel, Tourism and Leisure Surges
Scotland’s tourism operators have had reason to smile. Demand from both domestic visitors and international arrivals has been strong. The warmer-than-usual May and June helped—outdoor attractions, coastal destinations, and leisure activities saw a boost.
One Edinburgh-based tour operator reported that June bookings were up 12% compared to the same month in 2024. Smaller rural B&Bs and self-catering properties also noted higher occupancy rates.
It wasn’t just about the weather, though. With the pound trading at a level favorable to overseas visitors, Scotland’s major cities and scenic regions have been attracting more long-haul travellers willing to spend.
Business Services Break Out of Slump
Business services—covering everything from consultancy to outsourced back-office functions—had been under pressure for most of the past year. Client caution, driven by both UK economic jitters and uncertainty around US tariffs, kept demand muted.
June marked a turning point. Companies in this segment saw their first monthly rise in activity since late 2024.
One Aberdeen-based corporate services provider said it had secured new contracts with North Sea energy firms that were once again investing in support services after months of cost control. Others pointed to a modest but notable pickup in professional recruitment, a leading indicator for the sector.
Tech’s Slight Dip After Strong Spring
Technology, media, and telecoms (TMT) had been the standout performer through early 2025. Demand for cloud services, AI-driven analytics, and streaming content surged, lifting output to a six-month high in May.
June saw a marginal dip—likely more of a pause than a reversal. Analysts suggest that order backlogs remain healthy and that the sector is still benefiting from global appetite for digital transformation services.
Seb Burnside, NatWest Group’s chief economist, noted that “TMT firms in Scotland are well-placed to ride the global tech wave, but domestic economic conditions and trade policy uncertainty remain watchpoints.”
First-Half 2025: The Numbers Tell the Story
While June stood out, the broader first-half trends reveal how different sub-sectors have fared.
| Sub-Sector | H1 2025 Performance | Key Drivers |
|---|---|---|
| Technology, Media & Telecoms | Strongest growth overall | Global demand for tech services, digital adoption |
| Travel, Tourism & Leisure | Solid growth | Consumer spending, warm weather, currency advantage |
| Business Services | Weak early 2025, rebound in June | New contracts, easing client caution |
Notably, consumer-facing services benefited from resilient household spending, even as some firms in B2B segments flagged lingering caution among corporate clients.
Weather and Wallets Working Together
The unseasonably warm late spring was more than just pleasant—it helped restaurants with outdoor seating, tourist attractions, and leisure facilities see higher footfall. Combined with stable employment levels, this created an environment where people were willing to spend.
One Glasgow café owner said, “May felt like July, and the customers treated it that way. Patio tables were full every day.”
Challenges Still in Play
Despite the upbeat tone, risks remain. Some firms cited weaker domestic economic confidence, while others mentioned delays in orders from US clients linked to tariff uncertainty.
Business services, in particular, remain vulnerable if corporate budgets tighten again. And while consumer demand has been resilient, any uptick in unemployment or inflation could dampen spending.
Outlook for the Rest of 2025
If current momentum holds, Scotland’s service sector could post its strongest annual growth since before the pandemic. Tourism is likely to stay buoyant through summer, and tech demand shows no sign of drying up.
Business services will be the one to watch—whether June’s rebound was a blip or the start of a more sustained recovery will depend on both domestic policy stability and global market conditions.
For now, though, mid-2025 finds Scotland’s service providers on surer footing than they were in early spring. And in a sector that represents such a large slice of the nation’s economy, that’s no small thing.
