Business leaders in the north-east will pursue a region-specific rates deal amid a warning firms have been hit by a “double whammy” of local lockdowns and a downturn in oil and gas on top of the Covid crisis.
Members of Holyrood’s economy committee heard on Tuesday how a fall in the price of oil prior to the pandemic and missing out on a boost from the Eat Out to Help Out scheme had piled further misery on businesses in Aberdeen and Aberdeenshire.
The region was dealt another blow last week as MSPs agreed to delay a revaluation of business rates by an extra year to 2023, with the tone date – the fixed point that assessors use to calculate values – moved back to 2022.
Three years before rates are ‘corrected’
Business rates are currently based on valuations done in 2015, before the oil and gas downturn, and transitional relief set up to mitigate the disparity between rateable and real values is set to expire at the end of this financial year.
Aberdeen and Grampian Chamber of Commerce (AGCC) is now calling for a region-specific deal to reflect the extra challenges being faced by north-east firms.
Shane Taylor, research and policy manager at AGCC, told the committee that business rates had been a “key challenge” for the region and the decision to delay the revaluation would present “some real challenges” locally.
“I think there’s both a national and local north-east policy focus here,” he said. “The key one is understanding for retail, for hospitality, how the business rates relief will phase out.
“Many in those sectors are looking towards what will potentially be quite a challenging Christmas and an unclear path after that in terms of the footfall challenges and working habit changes.
“So the key focus there would be the government setting out very clearly what the path will be for rates at the next budget, what the path will be for rates relief, particularly for those key sectors that are most impacted.
“And I think equally for the north-east more broadly, our view is, there’s a need to focus on a specific regional rates deal for this region as well because that delay in the revaluation means that the region is going to be facing rates which don’t reflect reality for a significant additional period of time.”
A precarious recovery
Some of the industries hardest hit by restrictions imposed by the Covid-19 pandemic, including hospitality, retail and live events, are also those with the largest business rates burden, and industry leaders fear the wrong move could put jobs at risk.
Prior to last week’s vote, the AGCC attempted to put forward a compromise that would see the tone date moved to 2021, to still take into account the impact of the pandemic, but with the revaluation date being kept to 2022, so the north-east could have values “corrected in a reasonable amount of time”.
Speaking after the committee meeting, Mr Taylor said raising the issue is just the “first point” and the group intends to begin further discussions with ministers in the days and weeks ahead.
“The transitional relief reflected the economic conditions and the hope that things would eventually improve,” he said.
“We saw a bit of that with the recovery the region has had over the last few years off the back of the downturn but it’s still quite a precarious recovery.
“Now we’re at the point where effectively we’re not quite back to square one but the region has gone through a very clear further economic clash and we’re not going to get those rates sorted in the next revaluation any earlier.
“That means it will be three years, effectively, before the values get corrected.”
Finance secretary Kate Forbes argued it would be “irresponsible” for the Scottish Government to proceed with 2022 revaluation based on information at April 2020, when Scotland was just one month into lockdown.
Ms Forbes said the original plan would lock businesses into revaluations that did not reflect the impact of the pandemic.
She added: “These regulations are based on an understanding of the risks to businesses which is, in turn, based on the most robust and verifiable evidence and data that we have.”