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Business leaders warn doubling of rates supplement will hit firms

Five of Scotland’s leading industry and sectoral representative groups have combined to voice concern over the additional business rates supplement now being levied on firms occupying medium-sized and larger commercial premises in Scotland and the departure away from the previous level playing field with the rest of the UK.

The doubling of the large business supplement which came into effect this month is expected to add an extra £60 million each year to these firms’ rates bills, and affect 1 in every 8 commercial premises in Scotland.

This month the main poundage rate increased to 48.4p in the £, with the extra supplement levied on larger firms’ on top of this doubled to 2.6p. In England the supplement remains at 1.3p in the £. The total tax revenue from business rates in Scotland is forecast to be £2.8 billion this year, up from £2.07 billion in 2010-11.

The five business groups – Scottish Chambers of Commerce, Scottish Engineering, Scottish Tourism Alliance, Scottish Property Federation and the Scottish Retail Consortium - have spoken out following the First Minister’s remarks at the launch of the SNP manifesto last week which suggested the £60 million annual rates surcharge would remain in place for the duration of the next Parliament.

Bryan Buchan, Chief Executive of Scottish Engineering, said:

“The imposition of an additional levy on business rates is a burden which an already-struggling manufacturing and engineering sector can ill-afford. Given the avowed intention to support and promote our sector in the recently-published “Manufacturing Future”, this seems directly at variance with Scottish Government policy. As the threshold is at a lowly £35,000 of rateable value, many relatively small fish are going into the cod-end of this very wide net.”

Liz Cameron OBE, Chief Executive of Scottish Chambers of Commerce, said:

“The decision to double the large business supplement puts many Scottish businesses at a competitive disadvantage to their counterparts in England at a time when the Scottish economy is underperforming that of the UK as a whole. This additional tax affects a wide range of businesses, including shops, offices, factories and hotels for whom an increase in their fixed costs is the last thing they need at the moment. This is another reason why the forthcoming review of Business Rates in Scotland must be fundamental and comprehensive.”

Marc Crothall, Chief Executive of the Scottish Tourism Alliance, said:

“Stimulating business investment is more difficult when costs are rising as it means diverting cash and resources away from growing the business. Tourism firms are already grappling with a range of government-imposed cost rises - including the new national living wage and higher employer pension contributions – as well as rises in business rates, and now this supplement on top. “

David Lonsdale, Director of the Scottish Retail Consortium commented:

“With shop vacancies increasing and one in every ten retail premises now empty, there is a pressing need to reduce the cost of doing business. The doubling of the rates surcharge only adds to the burden and is at odds with the oft-stated aim of pursuing the most competitive rates regime in the UK. We’ve yet to hear a convincing explanation as to why firms operating from medium and larger sized premises in Scotland are better placed to be stumping up more in business rates than firms in comparable premises elsewhere in the UK.”

David Melhuish, Director of the Scottish Property Federation, said:

“Our rates are now set at 51p in the pound for many ratepayers and this is before the effects of the 2017 revaluation which could well increase the poundage further and raise bills for many ratepayers. We need a rates system that seeks to grow the tax base through encouraging new development and business growth, rather than continuing to increase the tax burden on relatively few ratepayers which will only erode our long-term competitiveness.”