Early tests for Yousaf in Scottish business 'reset'

But new tests have already emerged that have the potential to challenge that worthy aim.

While there has been a cautious welcome to Mr Yousaf’s plans for a “new deal” for business – the New Deal for Business Group is understood to have held an encouraging first meeting last week – it did not take long for his administration to find itself at odds with the retail sector.

The Scottish Retail Consortium is not given to shrill pronouncements but certainly made itself clear after public finance minister Tom Arthur was less than convincing when asked whether ministers would make good on a key SNP manifesto pledge regarding business rates.

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The pledge in question, made in the party’s 2021 election manifesto, was to restore parity with England over the higher property rate “over the course of this parliament”.

Research from the SRC found that the higher business rate of 52.4p – applied in Scotland to properties valued at £100,000 and above – means that firms in Scotland will pay nearly £60 million more collectively in business rates than their counterparts in England per year.

In England, there are two poundage rates, a standard multiplier of 51.2p for properties with a rateable value of £51,000 or more, and 49.9p for buildings valued below £51,000.

The other rates applied in Scotland are 49.8p for properties valued at up to £51,000 and 51.1p for those valued from £51,001 to £100,000 

Asked in parliament if the Scottish Government would fulfil the manifesto pledge, Mr Arthur suggested it would depend on available funding.

He said: “We are operating in a very demanding set of fiscal circumstances. However, we are committed when it is affordable, and finances allow, to meeting that commitment on the higher property rate.”

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Cue an angry statement from the SRC, with director David Lonsdale declaring that the “apparent retraction… is incredibly frustrating and troubling”.

He said: “There is no credible justification why firms operating from 11,000 premises in Scotland are apparently thought to be better placed to be forking out more in rates than firms in comparable premises in England.”

Unfortunately for Scottish ministers in their drive to repair relations with the business world, this was not the only bump in the road last week, as a familiar problem in a different arena returned to haunt them shortly after.

It emerged on Friday that the Scottish Government will face compensation claims worth millions of pounds from businesses over the deposit return scheme if the controversial policy does not go ahead.

Mr Yousaf pushed back the implementation date for the DRS to March next year from August after a range of concerns about the scheme were raised by the business community. But unless the UK Government grants permission for the scheme to go ahead by agreeing an exemption under the Internal Market Act, it will not go ahead at all.

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Groups representing producers, suppliers, retailers, and licensed premises have said they will be demanding money back if the initiative is axed, having already invested heavily in preparation for the recycling regulations coming into force.

“This gets more farcical by the day,” said Colin Wilkinson, managing director of the Scottish Licensed Trade Association. “In my view, the Internal Market Act issue is like building a 20-storey tower block then applying for retrospective planning permission. Who would be so presumptuous?”

Mr Wilkinson added: “If the scheme is cancelled and millions of pounds wasted, the Scottish Government will have to brace itself for the compensation claims that will inevitably start pouring in.”

Returning to business rates, the Scottish Government has in recent days faced a different line of attack from the higher property rate, and this time it is centred on the different approach it has taken from the UK Government with regard to the retail, hospitality, and leisure sectors in the current financial year.

Karen Forret, managing director of clothing chain Wilkies, highlighted that her company’s store in North Berwick pays £10,000 per year in business rates while its shop across the Border in Berwick-upon-Tweed pays just £2,620, even though the two properties have the same rateable value.

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The difference is down to the 75 per cent relief from business rates that firms in the retail, hospitality, and leisure sectors are entitled to in England and Wales that has not been offered in Scotland.

Ms Forret told The Herald that the difference is “huge” and declared help on business rates would make a massive difference to retailers in Scotland as they struggle with the cost of doing business crisis.

“It’s huge. It’s a difference of about £95,000 (across the Wilkies group) in help which would go in some way to covering these extra costs until inflation settles,” Ms Forret said.

Yet, while the case advanced by Ms Forret is convincing, the Scottish Government rightly pointed out that in does provide significant support over business rates in different ways.

A spokesman told The Herald that ministers had frozen the poundage rate for 2023/24 – “the biggest ask of business” – and that its rates relief package was “estimated to be worth £744 million in 2023-24”. The spokesman added that this “ensures that around half of properties in the retail, hospitality and leisure sectors in Scotland will pay no rates in 2023-24 due to the most generous small business relief in the UK.

“Properties in these sectors may also be eligible for the transitional relief schemes set out in the Budget."

Colin Borland, director of devolved nations at the Federation of Small Businesses, told The Herald that the relief provided in Scotland through the small business bonus scheme has been an “absolute lifeline for our smallest operators, many of whom tell us they simply couldn’t afford to operate without it”.

He said: “Over a third of respondents to our recent Big Small Business Survey told us that they will maintain some level of relief following recent revaluations and the changing of thresholds.”

However, Mr Borland warned: “It’s worth noting that the sector which told us it was most likely to have seen rateable value increases was hospitality, which is especially concerning given the Scottish Government’s decision not to reintroduce Covid reliefs for this sector, unlike elsewhere in the UK.

“When nine in ten traders are telling us that the cost of doing business is on the rise, it’s critical that the Scottish Government doesn’t add to their cost burden, jeopardising the wealth and employment they bring to local communities across Scotland.”