BUSINESS leaders have warned around 20 per cent of Scotland’s small businesses could be shut down if rates relief is abolished, in a development that could put thousands of firms at risk.

In a survey by the Federation of Small Businesses, 19 per cent of respondents who benefit from the Scottish Government’s Small Business Bonus said they would close their firms if the scheme is axed.

The organisation said the research underlined the importance of a programme which has provided a life line for legions of small firms during a decade of turmoil by cutting rates bills to zero for many.

Colin Borland, the FSB’s head of external affairs in Scotland, said: “From our research, it is absolutely fair to suggest that thousands of firms could be at risk if the small business bonus scheme is scrapped.”

The relief is being claimed for 100,000 properties in the current year.

Closures on the scale suggested by the federation could have a devastating impact on economic growth and jobs.

The FSB noted the research showed firms have used the annual savings of up to £4,000 they achieve under the bonus scheme to invest in staff and grow their businesses, with benefits for the wider economy.

Small firms account for the vast bulk of the business base in Scotland and almost half the jobs in the private sector. They are likely to be more vulnerable to a slowdown than bigger firms with deeper pockets.

The Brexit vote on 23 June has clouded the outlook for the economy, although the impact to date has not been as bad as some feared.

Official figures showed yesterday that Scotland’s economy grew by 0.4 per cent in the second quarter after standing still in the first three months of the year. Output increased by 0.7 per cent in the UK in the latest quarter.

The release of the survey findings appears to have been timed to coincide with the start of the Scottish National Party annual conference in Glasgow today.

The Scottish Government has appointed veteran banker Ken Barclay to complete a review of the business rates system, which will be published next year.

Some have questioned the value of the bonus programme at a time when public spending is under intense pressure.

Firms will save £174 million in total this year under the scheme, under which they can get up to 100 per cent relief from rates on qualifying properties.

In August the Scottish Trades Union Congress said the government should reassess the policy in light of Britain’s vote to leave the European Union.

Stephen Boyd, Assistant Secretary of the STUC, said the scheme was a waste of scarce public resources that could demonstrate no tangible outcomes in terms of jobs or investment.

However, the bonus has been a key element of official efforts to support business since its introduction in 2008.

In March Nicola Sturgeon said it should be retained until at least 2021.

Yesterday a spokesperson for the Scottish Government said the bonus has delivered over £1 billion in savings for smaller firms. The Government plans to extend the scheme to exempt 100,000 properties from bills entirely next year, up from 80,000 this year.

She added: “We commenced an external review precisely so we could engage with business and explore how rates can better reflect economic conditions and support growth. We warmly welcome the contributions of the business community.”

The FSB wants the rates system modernised to cut bureaucracy and costs.

CBI Scotland has warned failings in the rating system may make it harder to persuade firms to remain in the country in the wake of the Brexit vote.

The organisation, whose members includes big firms, said properties should be assessed every three years to ensure the valuations used to calculate rates bills reflect economic reality.

It wants ministers to incentivise investment in areas such as environmental efficiency and to modernise the billing and collection processes.

The FSB surveyed 960 members in August and September.

Some 37 per cent used savings on rates to invest in their business. Nineteen per cent invested in staff.