Rates relief is underwhelming for retailers facing cliff edge - David Lonsdale
One of the biggest differences between Budget day at Westminster and Holyrood is the lack of pre-briefing.
This year Government briefing was limited to the SNP Conference announcement on doubling the Scottish Child Payment.
For retailers the calculus was simple. After two years of welcome and much needed 100 percent business rates relief the question was whether there would be any blunting of the cliff edge back to full payment next Spring. For businesses who are seeing high street footfall down by a fifth and trading at 90 percent on pre-pandemic levels that prospect is deeply concerning.
In that context the Finance Secretary’s announcement of a time-limited rates relief which was little more than a pale imitation of the UK Government’s scheme was, to be charitable, underwhelming. The scheme will apply for three months, and really only be of benefit to smaller retailers, doing little to help the industry as a whole and the retail chains which are vital to healthy high streets and city centres. Many of these retailers, who are already battling hard to secure vital Christmas sales, will in effect face a return to full rates liability next Spring. If those businesses fail to trade well over the next few weeks, or if the nightmare of further Covid restrictions returns, then that liability will become even more overwhelming. In that circumstance the rates decision may come to look short-sighted.
There was positive news on the poundage rate, where the welcome approach of keeping a lower poundage rate than in England was continued, albeit the largest shops here will continue to be whacked with a higher property surtax which is greater than the equivalent in England. Nonetheless, the path back to full business rates liability looks more like a sheer cliff than a sloping path for much of the industry. The green light given to councils to introduce workplace parking levies won’t help either.
The tale was similar from the perspective of consumers. Income tax band changes will see £106 million squeezed out of tax payers, whilst there are no caps on council tax which could see further spiralling bills. With household discretionary spending already heavily impacted by energy cost rises and wider inflation it’s hard to see how retailers can trade their way back in the next few months.
One piece of good news could be found in the Scottish Fiscal Commissions projections – with the welcome news the economy will bounce back to pre-pandemic levels next year. However, the long-term growth picture is less rosy. The need for radical action to improve productivity, drive innovation and lift private sector growth remains essential.
The last two years have been brutal for Scotland’s retailers. Vacancies are at a six year high, sales remain stubbornly below pre-pandemic levels, shopper footfall is down a fifth. The challenges remain immense. Scottish retailers have been managing some form of Covid rules all year, they have been battling global supply chain disruption, and doing so whilst adjusting to life outside the EU. Businesses have taken on immense debt, and shopworkers have time and again had to summon themselves to deal with an ever-growing list of government requirements. Retail remains a resilient industry and will strive to pull forwards despite these obstacles. It’s just a pity this Budget doesn’t do more to help them with that journey.
David Lonsdale is director of the Scottish Retail Consortium
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