Intelligence Hub
Economic Briefing July 2026
Introduction
This latest briefing provides an overview of some of the latest economic developments relevant to Glasgow City Region, pulling together recent national and regional data alongside emerging academic and policy insights. It covers four key areas:
Latest Economic Statistics
- UK economic growth was comparatively strong in early 2026, with GDP increasing by 0.6% in Q1, outperforming the Eurozone and US, supported by growth across the services, production, and construction sectors. Inflation remained elevated at 2.8% in May 2026. Scotland’s labour market weakened relative to the rest of the UK, with rising unemployment and economic inactivity between February and April 2026.
Productivity & AI
- AI is increasingly driving productivity and workforce change. Firms that successfully integrate AI are achieving stronger productivity growth, rapid shifts in skills requirements, and rising demand for human skills alongside technical AI capabilities.
- Across the UK AI-related hiring is recovering to 2022 levels. There is also a strong wage premium for AI skills and a growing demand for AI users – with the greatest skills changes occurring in AI-exposed occupations.
Greater Manchester and Economic Prosperity
- Andy Burnham’s by-election success and Kier Starmer’s resignation have prompted analysis of Manchester’s economic transformation. Research highlights the role of long-term leadership, private sector investment, connectivity, and agglomeration in supporting regional growth, offering lessons for other city regions seeking to improve productivity and attract investment.
Young People aged 16-24 Not in Education, Employment or Training (NEET)
- Published last month, the UK Young People and Work Interim Report (Milburn Review) highlights the scale and persistence of youth disengagement from education, employment and training across the UK. It frames the issue as increasingly entrenched, describing it as a “moral crisis with economic consequences,” and argues for urgent action to prioritise re-engagement and strengthen the systems supporting young people into adulthood.
The Latest UK and Scotland Data
The latest estimates of Gross Domestic Product (GDP), Inflation (CPI), and the Labour Market have been published by the Office for National Statistics.
GDP: UK GDP is estimated to have increased by 0.6% in 2026 Q1, and this figure has been left unrevised by the ONS in their latest update. There were reported increases in output from the Service, Production, and Construction sectors. Following this, in the three months to April 2026, UK GDP grew by an estimated increased rate of 0.7%.
Inflation: CPI rose by 2.8% in the 12 months to May 2026, unchanged from the 12 months to April 2026. This is below the 3.0% prediction of many analysts following the conflict in the Middle East.
It is still expected that a period of increased inflation will resume in the coming months as the conflict in the Middle East keeps pressure on energy prices.
Labour Market: As noted in Figure 1, the updated labour market estimates from February to April 2026 show a decrease in employment and a worsening of unemployment in Scotland compared to the rest of the UK. However, Scotland’s increase in economic inactivity was smaller than the UK’s increase. The analysis also noted that the number of job vacancies is at a 5-year low.1
Figure 1: Labour Market Indicators
AI and Productivity
PwC research at a global scale has investigated the link between interaction of AI and productivity gains, and changing skills requirements.
The PwC 2026 AI Jobs Barometer research report analysed over 1 billion job adverts over 6 continents, providing a number of insights into how AI is impacting jobs. It noted:
- The leaders in AI are beginning to pull ahead – companies with the greatest ability to apply AI to operations have achieved productivity growth of 34%, compared to 24% in companies less able to integrate AI into their operations.
- The ability to integrate AI at scale appears to produce the largest increase in productivity – the top 20% ‘super-star’ global firms capable of embedding AI at scale have recorded an average productivity growth of 163%. This is nearly five times higher than the most AI-exposed companies – where AI can perform tasks that are part of business operations.
- The introduction of AI is accelerating skills change – the PwC analysis found a positive correlation (0.33) between AI exposure and changes in skills requirements. The occupations with the greatest AI exposure experienced roughly double the required advertised skills than that of the least-exposed jobs.
- There is a growing requirement for human skills alongside this increase in demand for skills in AI – Interestingly, even in entry-level roles, there appears to be an increasing requirement for leadership, judgement and soft skills in the workforce to complement skills in AI. In the US, the number of entry-level roles with senior-level skills requirements has grown by 35% since 2019, while other traditional entry-level roles, with less skill requirements, shrank by 10%.
Note: In a recent bespoke briefing on AI, released in June 2026, the Intelligence Hub further investigated the true impact of AI on the economy.
PwC provided a further investigation into the impact of AI at the UK level on hiring and skills demand, investigating impacts at the sectoral level.
PwC’s deeper-dive into the impact of AI found:
- AI hiring in the UK is increasing – AI hiring in the UK has rebounded and has now returned to 2022 levels. This increase in AI hiring has impacted all sectors of the UK economy.
- Both the higher and lower AI exposure sectors attract a higher AI wage premium – Figure 2 illustrates that both the higher and lower AI exposure sectors attract a higher AI wage premium – otherwise known as the additional pay for AI skills. In lower-exposure sectors this likely reflects niche, high-value roles, while in higher-exposure sectors it likely reflects the strategic importance of AI skills across the workforce.
- AI job demand in the UK remains dominated by users – While there is growth in demand for both AI users and AI developers, the demand for users remains much higher in the UK economy. Advertised AI user roles increased by 65.8% and developer roles increased by 21.6%.
Figure 2: AI Wage Premium by Sector in the UK in 2025
Source:
The Government and Public Sector had the lowest AI wage premiums in 2025, which raises important questions regarding the Public Sector’s current ability to integrate AI into operations.
Manchester and Future Political Change
The prospect of Andy Burnham becoming the UK Prime Minister, following Kier Starmer’s resignation, has led to a series of reviews on the transformation of Greater Manchester.
The Financial Times explored the drivers behind the economic transformation of Manchester, while considering the legitimacy of Andy Burnham as the face of Manchester’s revival:
- Manchester’s success has been rooted in a long-term, pro-business economic strategy – Back in 1998, Richard Leese, leader of the council, and Howard Bernstein, the Chief Executive, provided stable leadership and a consistent vision for growth, laying the foundations for Manchester’s economic transformation before Burnham.
- Private sector investment has been a key driver of growth – Rather than relying primarily on state-led intervention, Manchester focused on attracting and enabling private investment to support regeneration, business expansion, and job creation.
- Devolution paired with a championing of the city – Gaining powers from Westminster, the 2014 Devolution Deal has helped increase Manchester’s standing and provided investors with confidence.
Figure 3: GVA per head for Manchester and Greater Manchester. Current value for UK average = 100.
Source:
Figure 3 above shows the increase in GVA per head in Manchester and Greater Manchester, identifying the timeline of the Devolution deal and Burnham’s mayorship.
The Financial Times further investigated the nature of Manchester’s economic growth, identifying key drivers of success.
The Financial Times identified the following positive outcomes from Manchester’s approach:
- A strong city centre has created a virtuous cycle of growth – The concentration of businesses, workers and amenities has attracted foreign direct investment, improved graduate retention, increased start-up activity, and supported the expansion of high-value sectors. Nevertheless, there have been some critiques of this model as noted in the Intelligence Hub’s May briefing.
- Knowledge-intensive business sectors have more than offset manufacturing decline – Growth in professional services, technology, media, and other knowledge-based industries has driven employment growth and economic restructuring from historic industrial decline.
- Manchester has developed a stronger economic base for the future – Agglomeration effects and sustained investment have supported a stronger labour market, a larger tax base, and greater capacity to address inequalities over the long term.
Figure 4: Productivity and Employment Growth rates in the UK, 2008-2025.
Figure 4 above shows Greater Manchester’s productivity and employment growth having outperformed the UK average.
The Productivity Institute and the 'Manchester Model'
The Productivity Institute also explored the success of the ‘Manchester Model’, by investigating the mechanisms of the city’s ability to attract foreign investment.
The Productivity Institute noted Manchester’s ability to channel foreign direct investment into productive uses as a recognisable ‘Manchester Model’:
- Greenfield investment accounts for a large portion of inward investment into Manchester – Investors are creating new productive capacity rather than acquiring existing assets. Greenfield investment made up 54% of Manchester’s inward investment, compared to 22% in Birmingham, 14% in London and 10% in Leeds.
- Foreign investment has been concentrated in the sectors driving Manchester’s productivity growth – Inward investment has been focused on high-value sectors such as Information and Communication, and Professional, Scientific and Technical activities, reinforcing the city’s transition towards a knowledge-based economy.
- Manchester’s university–industry ecosystem has strengthened its ability to attract investment – Strong links between universities, research institutions, and businesses have supported innovation, commercialisation, and the development of a highly skilled workforce, making Manchester an attractive destination for investors. It is important to note that it is not the only the standard of universities within the ecosystem, but the level of industry engagement that impacts foreign investment decisions.
- The ‘Manchester Model’ demonstrates the value of combining investment attraction, innovation assets, connectivity, and strong local leadership – The interaction of these factors has helped Manchester become the UK’s most productive large city outside London.
Sources:
An EY survey revealed that Glasgow is 4th in cities outside London for foreign direct investment. Glasgow and GCR may benefit from further pursuing aspects of the ‘Manchester Model’ to ensure new foreign direct investment in the future.
Sources:
Youth NEET in the UK: A Growing Structure Challenge
The recently published UK Young People and Work interim report (2026) (Milburn Review) identifies 1 million 16 to 24- year-olds as being NEET, the highest estimate since 2013.
What is Youth NEET?
Young people aged 16-24 that are not in education, employment or training.
Why this issue matters?
The Milburn Review frames rising NEET levels as a systemic issue rather than an individual one, reflecting institutions that are no longer fit for purpose. The report argues this trend is avoidable and highlights the significant economic and social gains that could be realised if barriers to participation were addressed. Its final report (later this year) will outline what this system should look like: governance, funding, accountability, and how it reaches those currently falling through the gaps.
How is this relevant for Scotland and Glasgow City Region?
Many of the challenges identified at the UK level are also evident in Scotland and Glasgow City Region. However, policy responses differ due to devolved systems across employability, education, and social security, while data limitations constrain a full understanding of youth disengagement.
Measurement Gap in Scotland
In place of NEET statistics, Scotland measures youth participation through the Skills Development Scotland’s Annual Participation Measure (APM) which covers young people aged 16–19 – whereas UK NEET measures those aged 16–24 and uses data from the Annual Population Survey (APS) making them not directly comparable.
The absence of a measure beyond age 19 creates a risk that health-related economic inactivity and longer-term disengagement are not fully captured and may therefore remain hidden, even where headline participation rates appear strong.
Scale of the Problem
The issue is worsening and becoming structural rather than temporary.
Economically inactive individuals are those without a job who have not actively sought work in the last four weeks, and/or are not available to start work in the next two weeks. For NEET young people, inactivity refers to those who are economically inactive for reasons other than education.
Figure 5 shows that young people aged 16 to 24 in GCR who are unemployed or inactive (and not in full time education)1 sit well above the national average (17.4% vs 12.7%)2, indicating weaker transitions into both education and employment. Furthermore, this is driven largely by high levels of inactivity, rather than unemployment alone, suggesting that the issue is not simply short-term labour market friction, but reflects deeper and more complex barriers to participation. Both the Scottish Government and the Resolution Foundation highlight that youth inactivity is multi-faceted, with most NEET youths facing overlapping barriers such as poor health, low qualifications, and disengagement. However, the largest driver of inactivity among youths is long-term sickness, accounting for 11% in 20253.
Figure 5: Youth Inactivity (Excluding Education) and Unemployment Rates (Ages 16–24), by Local Authority (Jan 2018 to Dec 2020)
Sources:
Young People Local Data, 2018-2020 Annual Population Survey 3-year poll
*Note: Data for unemployment for some local authorities is based on varying or small sample sizes so interpretation should be taken with caution. Distinct unemployment and inactivity figures for East Dumbartonshire were unavailable.
- Data does not account for people in training (i.e.: apprenticeships)
- Data does not include unconfirmed destinations, which should be considered when interpreting trends.
- APS. Data excludes student, discouraged, retired, and other as reasons for inactivity.
Economic and Social Costs
Every month a young person spends detached from education or work creates a cost to society. This reflects the monetised cost to the individual, their health, and the economy.
Economic:
The Milburn Review estimates the following:
Labour Market Opportunities: Research shows that not being in education, employment or training (NEET) during young adulthood is associated with a higher likelihood of being unemployed 10 years later1.
Future Income: Even if they re-enter the labour market, today’s 24-year-old NEETs will lose up to £300,000 in earnings over their lifetime as a result.
Taxpayer and Economy: The cumulative annual cost to the UK for 1 million NEET young people is estimated to be £125 billion. That is more than the UK spends on education each year.
For GCR, using the Milburn assessment, the estimated annual cost of unemployed and economically inactive young people (aged 16–24, excluding those in education)2 exceeds £260 million.
Social:
The NEET status can drive poverty through:
The “Income Scar”: Periods of being NEET early in life are linked to an income penalty that can permanently lower an individual’s earning potential well into adulthood.
Reduced Autonomy: Being out of work or education delays key life milestones, isolating individuals from routines and networks that are essential for building long-term career momentum.
Health and Wellbeing Decline: Youth disengagement is also linked with worse health and well-being outcomes later in life, including poorer self-reported health, higher rates of depression and lower job satisfaction by age 503.
Sources:
- 1K Ralston et al., Economic inactivity, not in employment, education or training (NEET) scarring: The importance of NEET as a marker of long-term disadvantage, Work, Employment And Society 36(1), March 2021, https://doi.org/10.1177/0950017020973882
- 2Assumes cost per young person NEET at 125 thousand (125 billion divided by 1 million ) and figures for inactivity and unemployment are drawn from the APS (2018-2020)
- 3D Bell & D Blanchflower, Young People and the Great Recession, Institute for the Study of Labor (IZA), April 2011.
Key Drivers
There is no singular explanation for young people becoming NEET: it is an interlocked health, participation and changing labour market issue.
Health: GCR is vulnerable to rising NEET levels given its persistently high inequality and poor health outcomes. Importantly, young people with a self-reported mental health condition are three times as likely to be NEET compared with those without1.
Youth Labour Market – Supply: Employment is concentrated in a narrow set of sectors, while low confidence, limited work experience, and barriers in application and interview processes continue to constrain youth access2.
Youth Labour Market – Demand: Employer behaviour has shifted, with fewer entry-level, part-time roles due to regulatory and operational constraints. At the same time, automation in hiring, poor skills alignment, and inaccessible job platforms are creating additional barriers to young people accessing first jobs3.
Education and Skills: The level of qualification was also shown to influence levels of inactivity amongst young people. In Scotland, young people with no qualifications had an increased risk of being NEET. School-level factors – including absenteeism, exclusion, and deprivation indicators – further increase risk4.
Apprenticeship is another area of concern. Modern Apprenticeship opportunities for 16–24-year-olds in Glasgow City Region have declined more sharply than the national average between 2019/20 and 2025/26. East Dunbartonshire and Renfrewshire experienced the largest percentage reductions (see Figure 6).
Figure 6: Change in Modern Apprenticeship Starts (%) for Ages 16–24, 2019/20 to 2025/26, by LA.
Sources:
Skills Development Scotland
Bibliography
- K Ralston et al., Economic inactivity, not in employment, education or training (NEET) scarring: The importance of NEET as a marker of long-term disadvantage, Work, Employment And Society 36(1), March 2021, https://doi.org/10.1177/0950017020973882
- D Bell & D Blanchflower, Young People and the Great Recession, Institute for the Study of Labor (IZA), April 2011.
- OECD (2024), Future-Proofing the Skills System in the Glasgow City Region (Scotland, United Kingdom), OECD Reviews on Local Job Creation, OECD Publishing, Paris, https://doi.org/10.1787/5f36b5db-en.
- The Health Foundation (2026), Young people with mental health conditions are now more likely to be NEET
- Scottish Government Report (2015), Consequences, risk factors and geography of young people not in education, employment or training (NEET).
Contact
Further Information
For queries and further information, please contact Christina Kopanou:
