Business rate changes to prompt mixed fortunes

While some firms will benefit from the rates overhaul, there are fears it will prove an intolerable burden for many. Picture: Michael Gillen
While some firms will benefit from the rates overhaul, there are fears it will prove an intolerable burden for many. Picture: Michael Gillen
Have your say

As is so often the case with change, an upheaval of business rates in Scotland looks set to see winners and losers emerge.

The plans were announced by finance secretary Derek Mackay in his draft budget, and include cutting the business rates poundage and raising the rateable value threshold, with the small business bonus scheme lifting 100,000 properties out of the charge completely.

Mackay insisted the plans will make sure “Scotland is an attractive place to live and do business”.

For those lucky firms who will no longer have a major outgoing, some say it could provide a broader, positive knock-on effect to high-street shops in, say, Linlithgow and make it more appealing as they battle out-of-town sites and online shopping.

But the changes, set to kick into effect in April, have not exactly been met with universal applause.

Opponents highlight that the property values used as a yardstick were assessed in April 2015, before the downturn in the oil price took hold and cast a long shadow over the economy.

READ MORE: Scott Macnab: Tax hike that could break Scots firms

Businesses, particularly in the North-east, have seen trade hit a slippery slope, and Scotland is lagging behind the pace of growth seen in the UK as a whole.

Additionally, larger premises housing the likes of pubs, restaurants, hotels, car showrooms and petrol stations are bearing the brunt of the changes, an extra hurdle to contend with in the continued storm of economic uncertainty. Derek Wallace and his wife Louise Gladstone, who own the Reds restaurant in Portobello, said they are facing a four-fold increase in rates, having now exceeded the threshold for the small business bonus scheme.

“We would effectively be working for nothing,” Wallace said, adding that they have calculated that in a worst-case scenario the rates increase would be enough to put them out of business within three months, and the most optimistic option involving laying off two of its six staff.

“My wife and I are very concerned, and we’re not alone,” he added, citing other leisure firms in the area facing even greater hikes. “We were appalled. This will cause businesses to board up.”

It also comes after his firm was already facing oncoming hurdles such as the increase in the minimum wage and pension contributions for staff under auto-enrolment.

These would result in a six per cent increase in prices “just to stand still”, while the rates jump would require a 15 per cent jump, but with some peers enjoying a competitive advantage by not having to pay any rates.

200 Voices: find out more about the people who have shaped Scotland

Petrol station owner Sebastian Nonis said he also faces the prospect of no profit and his firm going under with its business-rate bill more than trebling to £48,000, the biggest increase in Tayside.

“It’s a joke,” he said. “At the end of the day we have to cut our budget, we have to reduce our costs and maybe lose staff. It is getting harder and harder for small businesses.”

Yet Mackay says the Scottish government will not step in to help firms about to suffer crippling rate rises, and has instead pledged to work with councils on a local relief scheme. He has floated the possibility of councils offering breaks for firms badly hit by the revaluation, but ruled out a national transitional scheme to ease the sudden impact of the rises.

Additionally, business leaders say bigger Scottish firms are at a disadvantage to their English competitors, where the large business supplement is lower. Scottish Retail Consortium director David Lonsdale has said nearly 5,100 retail premises would continue to pay higher business rates than they would in comparable premises south of the Border, and described the costs as a “significant burden to retailers” that are not easy to absorb. Firms are able to take some action, with Mackay having encouraged them to appeal their valuation if they believe it is incorrect.

Business property adviser Christie & Co has warned that many businesses are burying their heads in the sand about a forthcoming rates increase.

It said in its Business Outlook 2017 report that such jumps, which are “quite staggering” in some sectors, will severely restrict these firms’ outgoings if “due attention” is not given.

“Some occupiers face significant hikes in rates payable that will stifle future investment and growth in the sector if not challenged and reduced,” it said.

“Towards the end of 2016, Christie & Co began undertaking due diligence on some large assets, and in reviewing business plans, we saw that some companies haven’t factored [the rates revaluation] in.”

Click here to ‘Like’ The Scotsman Business on Facebook