Budget will shape recovery for retailers - David Lonsdale

Finance Secretary Kate Forbes has described this year’s Scottish Budget as one of the most challenging since devolution. The public finances are confronted with pressures ranging from the impact of Covid on public services to stimulating economic recovery, and laying the foundations for a transition to a greener economy.

Edinburgh city centre during lockdown - footfall on Scotland's high streets is still only 80-90 per cent of pre-pandemic levels.

For Scotland’s retailers, the past 20 months have been incredibly challenging too, the most difficult period in recent decades. This matters because the sector directly employs 230,000 Scots and is critical to the viability of our high streets and town centres, as well as domestic suppliers.

Unfortunately, retail sales and shopper footfall continue to hover around 80-90 per cent of pre-pandemic levels. The shop vacancy rate has spiked to a six-year high. Retailers are feeling the heat after two years of ever-increasing pressures.

Against this backdrop, retailers are hoping the Finance Secretary might deliver a Budget Christmas present or two to help the industry. There are some clear priorities.

David Lonsdale, director of the Scottish Retail Consortium

Firstly, action to support consumer confidence and spending, the mainstay of our economy. A cocktail of rising prices – including household energy bills, petrol, and eating out – means consumer sentiment is fragile. The underlying causes are the consequence of global commodity and shipping price rises coupled with labour and raw material shortages. This is now filtering into higher consumer prices.

The Bank of England expects consumer prices to remain elevated until late 2022. The question is whether households will rein in spending and thus hold back the recovery. This is compounded by the weakness in shopper footfall, especially in city centres who are missing office workers and tourists.

Retailers are playing their part in trying to tempt shoppers, however policy makers could do more to reignite confidence and entice people back. Scotland could emulate Northern Ireland’s high street stimulus scheme, or temporarily slash city centre parking charges or fares on public transport.

With an uplift in employee national insurance contributions in the pipeline, Ministers should be wary of adding further pressure on to household finances. Workers on modest earnings should continue to be protected from rises in Scottish income tax rates and council taxes.

Firms need help too. Government has provided crucial support throughout the pandemic including the business rates waiver.

Yet retail is still struggling in the shadow of Covid. Two-thirds through the financial year and store sales are stubbornly short of pre-pandemic levels. As Holyrood’s Finance Committee has noted, many retailers have incurred significant debt through the crisis including Covid loans and tax deferrals.

As the guardrails of taxpayer support are withdrawn, retailers are ready to contribute their fair share. However, a return to full 100 per cent business rates from April, which were at a 21-year high prior to the pandemic, will be insurmountable for many shops.

Ministers should pursue a modest one-year further discount to business rates, applicable to all retail premises. This is backed by industry and trade unions. It would reflect market reality and provide a bridge to the property revaluation in 2023. It would support the survival of shops, the jobs they provide, and the vitality of our high streets. Following the recent welcome decision to continue to permit trading on New Year’s Day, a rates discount could form a key plank of the government’s emerging city centre recovery and town centre action plans.

The decisions that Ministers make in the Budget will shape the recovery. We hope their actions make the Christmas lights shine a little brighter above our retail destinations this year.

David Lonsdale, Director, Scottish Retail Consortium