Aberdeen is on course to have the weakest economic growth of any city in the UK and Edinburgh one of the strongest, according to new research from accountancy group EY.

The group’s regional economic forecast, published today, also says Scotland will see the slowest Gross Value Added (GVA) growth of the devolved administrations.

It predicts that Aberdeen will have a 0.9% rise in GVA over the next three years. That compares with 1.9% for Edinburgh and 1.6% for Glasgow, which is in line with the UK average.

Scotland is expected to achieve 1.4% growth which positions it ahead of the North East of England. Scotland’s 2025 employment growth is anticipated to be even slower, at 0.4%, compared to the UK average of 0.5%.

Edinburgh stands out among cities with a robust forecast for GVA growth in knowledge-intensive sectors, particularly professional, scientific, and technical activities. These sectors are significant drivers of GVA growth, contributing to Edinburgh’s overall economic resilience.

However, even Edinburgh will not match growth in some English cities. The report highlights a widening contrast with cities such as Reading and Manchester, which are expected to see GVA growth of 2.2% and 2.1%, respectively, driven by strong knowledge economies.

In contrast, smaller areas in Scotland, such as Perth and Kinross, are forecasted to have one of the weakest labour markets, with employment growth of just 0.1% per year. This disparity underscores the challenges faced by certain regions in Scotland, particularly those reliant on traditional industries.

Aberdeen’s slow growth is because of a contraction in the energy sector and limited growth in professional services. It is the only UK city expected to see less than one per cent growth from 2025 to 2028.

The report, which makes no reference to expected growth in renewables, says long-term decline in North Sea oil production is expected to pose a significant economic challenge for Scotland, particularly Aberdeen.

It coincides with an announcement by Hunting, the engineering and energy services support group, that it will be restructuring its European staff, including those in Aberdeen, and said the UK government’s North Sea taxes were a factor in the decision.

Graham Goodall, the firm’s regional managing director, said: “It’s no secret that the large operators are looking to downsize or exit the North Sea, and that has an impact on the service providers. The approach from the government has had a massive impact on our decision making.”

The EY report says the decline in activity in the oil and gas sector “present a significant impediment to growth – and one that may be further weighted to the downside, given the changed geopolitical trajectory since the new US administration took office.”

EY senior partner for Aberdeen, Moray Barber, said: “Both governments are arguably ambivalent towards new investment in oil and gas production, and the extension of the Energy Profits levy to 2030 has also acted as a barrier to investment – this despite energy price shocks over recent years, and the geo-political exposure of the UK and European economies’ reliance on imported oil and gas.

“Aberdeen continues to acutely feel the uncertainty over the UK’s energy future, and we’re seeing the reality of the resulting lack of confidence in these figures. The Chancellor’s upcoming Spring Statement – as well as the recently announced consultation to a successor regime to the Energy Profits levy – is an opportunity to reset and offer some much-needed assurance.

“If a sentiment change in global energy policy is triggered by moves in the US, then we could see an increase in finance flow into local projects and initiatives that are greatly needed if true energy transition – and revolution – is to be realised. Without it, then local jobs, our vibrant supply chain economy and the very future of the UK’s energy security continues to hang in the balance.”

EY UK Chief Economist, Peter Arnold, comments: “The years since the global pandemic has seen a two-speed economy emerge in the UK between knowledge-based industries and more consumer-facing sectors.

“While tech and professional services have recovered well and are around a fifth larger than they were pre-pandemic, sectors like hospitality and retail have struggled due to elevated energy and labour costs.

“It’s perhaps no surprise that locations with higher concentrations of these knowledge-based businesses are therefore expected to see the higher levels of growth and employment.”