HUNDREDS of small shops across Scotland will close as they face having to pay an additional £22 million in business rates, retail leaders have warned.

The Scottish Retail Consortium said high streets were already bearing the brunt of soaring costs and many stores will be forced out of business after next year’s rates were confirmed at 3.9 per cent.

The percentage increase is based on September’s rate of retail price index (RPI) inflation, which has been climbing sharply since 2008.

But while homeowners can only see bills rise by three per cent, retailers and other owners of commercial property will face a 3.9 per cent hike in their business rates from next April.

If the link was switched to the consumer price index instead, as recommended by the recent Barclay Review into business rates in Scotland, the rise would instead be just 2.8 per cent.

Retailers are demanding that ministers switch the index and help reduce pressure on beleaguered shop owners.

Ewan MacDonald-Russell, head of policy of the Scottish Retail Consortium, said: “Scottish businesses will be concerned at the potential for costs to rise further unless action is taken.

“The retail industry in Scotland is undergoing significant transition and retailers are seeking to respond positively with substantial investment in new technology, a more skilled workforce and better logistics.

“However, this is made all the harder by the rising cumulative burden of government-imposed costs which is an acute problem and is holding back investment.”

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The Scottish Retail Consortium (SRC) estimates that almost one-quarter of Scottish shops, more than 4,000 premises, could close by 2025.

Rural locations and small towns are likely to be among the hardest hit as technological change combines with rising costs such as the introduction of the living wage to make many outlets unsustainable.

The SRC’s most recent quarterly town centre shop vacancy rate increased to 9.3 per cent in July 2017, up from 7.5 per cent in July 2016, with almost one in every 10 shops lying empty.

Mr MacDonald-Russell added: “Scottish Ministers have the opportunity to take a different approach in the upcoming Budget.”

A campaign by the The Herald earlier this year highlighting the potentially devastating effects of rates revaluation on businesses and the economy led to a rethink by the Scottish Government.

Our Great Rates Revolt series of articles drew attention to fears across Scottish industries over the potential effects of increases on scores of firms, with many seeing hugely increased bills.

Amid unprecedented cooperation on the lobbying front from groups representing the many sectors, the Government was forced to act.

Finance Minister Derek Mackay announced a £45m package of measures to ease the burden of the new rateable values, including a 12.5 per cent cap on business rates rises for hotels, pubs, clubs, restaurants and cafes for the first year.

A Scottish Government spokesman said: “We are doing everything within our powers to support our economy.

“We have reduced the rates bills poundage by 3.7 per cent and also funded total rates relief of around £660m, including the Small Business Bonus Scheme which lifted 100,000 properties out of rates altogether.

“We have gone beyond the Barclay Review recommendations with new measures to drive investment, in addition to the growth accelerator which will mean businesses pay no rates for the first year on new and improved properties.”