Labour and SNP must find ways to help small firms amid rising concerns about tax

Just 12 per cent of firms in Scotland have ‘no concerns’

Small businesses are the engine of the Scottish economy. As of last year, there were nearly 360,000 private firms and 98.2 per cent of them were classed as “small”, with up to 49 staff. Many of these companies are facing worrying times.

According to a Scottish Government analysis of the Office for National Statistics’ latest Business Insights and Conditions Survey, just 12 per cent of all businesses were in the happy position of having “no concerns”.

For the first time since the survey began, the top concern was taxation, with 18 per cent of firms citing this as a worry, followed by falling demand for goods and services, at 13.8 per cent. Small-to-medium firms were significantly more likely to be concerned about taxation, at 19.1 per cent, than large businesses, at just 8.2 per cent.

Chancellor Rachel Reeves leaves 11 Downing Street on her way to the Commons to deliver her Spring Statement (Picture: Stefan Rousseau) | PA

This probably reflects the lesser ability of smaller firms, which often have tighter margins, to absorb higher costs. “An estimated 38 per cent of businesses were expecting to increase prices in April 2025, up from 24.2 per cent in the previous month,” the Scottish Government’s analysis said. Companies forced to put their prices up will understandably worry about a commensurate fall in demand.

Labour’s increase to employers’ National Insurance contributions kicks in from Tuesday, adding to woes such as Scotland’s higher tax rates – described as a “handbrake on growth” by Rain Newton-Smith, director general of the Confederation of British Industry – that have been making recruitment more difficult.

What’s more, the Institute for Fiscal Studies has also suggested that the UK Government may have to raise taxes even further later this year.

The Scottish and UK governments have talked about boosting economic growth and now need to deliver. There seems little chance of a U-turn from Labour on National Insurance or from the SNP on its higher rates of income tax.

But even as they stick to their guns, they must urgently look for other ways to help business. Otherwise, growth forecasts might be proved wrong once again and the country may begin a slide into recession.