Scotland’s retailers are bracing themselves for a £12 million rise in business rates that will batter already struggling firms, the Scottish Retail Consortium (SRC) has warned.
The SRC said “enormous pressure” was being put on businesses as a result of the controversial levy, which has proved particularly punitive in the north-east.
Across the region, the failure of the rates regime to take into account the oil and gas downturn has been blamed for firms going out of business.
April’s multi-million pound increase was forecast by the SRC as it published its own report showing the number of north and north-east shops fell between 2011 and 2016 – the most up-to-date figures available.
SRC head of policy Ewan MacDonald-Russell said Scottish firms also had to deal with the large business supplement, which is costing retailers almost £14 million per year.
Mr MacDonald-Russell called on ministers to bring the supplement into line with the rest of the UK.
“The expected £12 million increase in the retail business rates bill will further exacerbate the pressure, especially at a time where consumers are only spending on essentials,” he said.
The SRC said Scottish ministers had indicated next year’s business rates increase would go up in line with the Consumer Price Index (CPI) measure of inflation.
The Office of National Statistics recently said CPI in September stood at 1.7%, the figure to be used by the UK Government to calculate business rates in the next financial year.
The Scottish Government has said increases in the poundage rate will be capped at CPI.
On that basis, the SRC calculated that a rise in line with inflation would amount to an extra £60 million for all Scottish firms.
Retailers account for one fifth of Scottish business rates, giving them around an extra £12 million on their bill.
The SRC report “Key Facts and Figures” found that since 2011 there had been a 3.1% decline in retail employment in Aberdeen, down to 12,700 in 2016.
Over the same period, Aberdeenshire had experienced a 3% fall to 10,400.
The number of shops fell across the north, north east and Perthshire by 6.56% and retail turnover fell by 4%.
North East Tory MSP Alexander Burnett said the prospect of rising business rates was a “massive cause for concern”.
“The SNP’s brutal rates regime has had a ruinous effect on north-east business already,” Mr Burnett said.
A Scottish Government spokeswoman said 90% of Scottish properties paid lower rates poundage that elsewhere in the UK, adding that £750 million worth of rates relief was made available in 2018/19.
‘Completely unaffordable’
Spiralling business rates have been a particular issue in the north-east where businesses have been hammered by the controversial levy over the last few years.
Scottish Government analysis published in 2017 showed that more than half of the rise in business rates across Scotland had been borne by the north-east alone.
The timing of rates revaluation has disadvantaged Aberdeen and Aberdeenshire in particular because it has failed to reflect the oil and gas downturn.
The Scottish Government has proposed to move from a five-year to a three-year valuation cycle after 2022 to make the system more responsive to economic conditions.
Earlier this year, the prominent Aberdeen businessman Charles Skene warned the north-east was facing a business rates inspired “economic tsunami”.
Mr Skene, founder of the Skene Group, revealed his hotels have been hammered by a £424,000 jump in rates.
He said the 2017 revaluation meant his business had been hit by a “completely unaffordable” rise of 150%, from £280,000 to £704,000.
The businessman claimed other firms had also been hit by six and seven-figure increases at a time when their very existence is under threat.
Business rates are a tax levied on commercial premises such as shops, offices, warehouses and factories.
Most commercial and non-domestic properties pay business rates, in a similar way to households paying council tax.
The revenue raised is collected by councils and goes towards local authority services, but the tax rate is set by Scottish ministers.
The rate is calculated by multiplying the rateable value of a non domestic property by the poundage rate (or multiplier) set annually by the Scottish Government.
Usually the poundage increases each year by the rate of inflation to ensure that the same amount of money (in real terms) is collected each year.
