SCOTLAND lost almost one in 20 of its small private sector businesses last year, raising fears for the economy and local communities.

Official statistics recorded a drop of 8,830 in all private firms in 2017/18, a fall of 2.5%.

The decline was driven by a plunge in the number of so-called "unregistered" businesses, those not registered for VAT and/or PAYE, which fell by 4.9%.

The number of VAT/PAYE registered firms also fell for the first time since 2011, by 0.1%.

The Tories blamed an "anti-business attitude" by the SNP, while the LibDems blamed a Tory-driven Brexit.

In absolute terms, the year ended with the estimated number of all private sector businesses at 345,915, of which 176,295 were registered and 169,620 unregistered.

Despite the overall fall in businesses, the number of employers increased by 915, or 0.9%, from 107,465 to 108,380, the highest level since 2000.

The threshold for VAT registration in 2017/18 was turnover of £85,000.

Firms with with no employees and hence no PAYE registration - that is, sole traders and owner-manager businesses - accounted for 68.7% of all private firms in Scotland.

Andrew McRae, of the Federation of Small Businesses in Scotland policy chair, said the decline “spells trouble for our ambitions for our economy and our local communities”.

He said: “To tackle this problem, we need to see more people in Scotland choose to start-up in business and develop a business environment which helps local firms thrive.

“In the short term, we need to see a Brexit deal which works for smaller firms, not just key sectoral interests and a Scottish budget which puts enterprise at its heart.

“In the long term, we need a stronger start up culture; as well as tax and regulatory systems which recognise the difference between multinationals and family firms.”

At March 2018, there were 343,535 small and medium-sized enterprises in Scotland, providing an estimated 1.2m jobs, accounting for 99.3% of private sector businesses, 54.9% of private sector employment and 41.5% of private sector turnover.

Mr McRae added: “These figures underline just how important smaller businesses to the fabric of Scotland. There are roughly three times as many Scots employed by these operators than work in the NHS and our local authorities combined. By giving smaller businesses the best chance to succeed, we can boost prospects for the country as a whole.”

There was more positive news on productivity in other economic statistics.

Productivity in the year to Q2 of 2018 (April to June) rose by 1.3% in real terms, compared to a fall of 0.4% in the year to March, which included the extreme winter weather of the 'Beast from the East'.#

Tory MSP Murdo Fraser said: "Over the years we’ve heard plenty of warm words from the SNP about encouraging entrepreneurship and supporting those who set up their own businesses.

“But those words have come to nothing, and these figures today show the situation is now going backwards.

“This is all the consequence of an SNP government with an anti-business attitude.

“Instead of helping people who want to take risks and go it alone with their business, the nationalists focus on hiking tax and punishing hard work.

“It’s no wonder the number of private business has fallen as a result.”

Labour MSP James Kelly claimed the SNP was presiding over "an exodus" of small businesses from Scotland.

He said: "As the Federation of Small Business points out, this sharp decline spells bad news for our economy and local communities.

“Meanwhile, firms are also crying out for certainty amid the Tory government’s calamitous handling of Brexit.” 

Scottish LibDem leader Willie Rennie said: "These figures show that there are thousands fewer businesses.

"We know Scottish growth has been marginal and this is being reflected in the falling numbers of businesses operating here.

"Businesses can only grow and flourish if they can find the right talent. The Scottish Government needs to build a high-skill high-wage economy by investing in people, transforming our education and skills system and making a stepchange in mental health.

"The Conservatives' undue reputation for business savvy is also in tatters. That's why we need an exit from Brexit because it makes no sense to put more barriers in the way of business."

A Scottish Government spokesperson said: "We are committed to helping businesses start-up and grow. Recent figures show the Small Business Bonus Scheme (SBBS) provided £254 million in rates relief to over 119,000 businesses in 2018-19 – a 65% increase since 2008-09 with around 104,000 properties being in receipt of 100% SBBS over the period.  

“We accepted the recommendation of the Barclay Review to evaluate the Small Business Bonus Scheme and will announce the details in due course. Any findings will be addressed in time for the 2022 revaluation.”