As the Christmas lights go up, all is not well in Scotland’s shopping destinations. Tough trading conditions, changing shopping habits, and high taxes are making life difficult and are upending many retail businesses. Countless household names have stumbled or tumbled this year, an annus horribilis for the industry. As such retailers are hoping the Finance Secretary, Derek Mackay, might deliver a Budget Christmas present to help our industry.
The UK Chancellor’s recent Budget showed retail has leapt up the political agenda. Recent statistics underscore how big the challenge is – 5,700 Scottish retail jobs have disappeared in two years and store numbers are down four per cent over three years, steeper than elsewhere in the UK. Shop vacancies and footfall tell a similar story, and the SRC-KPMG retail sales monitor has barely grown over the past 12 months.
The good news is that there has rarely been a better time to be a shopper in terms of choice, convenience and prices. The flip side is these are testing times for retailers, with larger stores and retail chains often feeling it most.
So what do retailers want from the Scottish Budget next month? Put simply, a focus on economic growth, one that supports consumer spending and brings down the cost of doing business.
Household finances are under strain and will be tested further next spring with rises in both council tax and the legal minimum we put into our pensions. MSPs ought to be wary about heaping further pressure on to consumers. Protecting workers on low or modest earnings is the right approach, so bolster confidence by ruling out increases in income tax and by accelerating the planned £250 zero-rate income tax band.
Business rates remain onerous. Since 2010-11 the headline tax rate has jumped from 40.7 per cent to 48 per cent now. For the 5,128 retail premises subject to the large business rates supplement, the comparable figures are 41.4 per cent and 50.6 per cent, now the highest in the UK.
Retailers account for 22 per cent of rates paid and ultimately we want to see a medium-term plan to substantially lower the rates burden. In the short-term concrete action is needed to freeze the headline business rate. This would benefit all retailers and deliver a more strategic approach than the sticking plaster the Chancellor envisages for down south.
The large business rates supplement is currently twice that which applies elsewhere in the UK. This costs Scottish retailers £14m annually. All it does is make it less attractive to operate a shop on our already gap-toothed high streets. Restoring the level playing field with England should be a priority.
The proposed new business rates levy on out of town and online businesses should be scrapped. The case for it hasn’t been made, as evidenced by the formidable cross-section of commerce and industry who have publicly questioned the wisdom of the tax. It would add fresh cost, complexity and unpredictability into the rates regime, and is utterly at odds with the thrust of the other welcome reforms in the Non-Domestic Rates Bill.
Whilst Philip Hammond fumbled the chance to make a real difference to struggling high streets, some of the extra funding he announced will come to the Scottish Government as Barnett consequentials. Mr Mackay should use that unexpected windfall more effectively to support the measures we’ve outlined.
Retailers are reinventing themselves to face the future and the decisions the Finance Minister – and all MSPs – make in the Budget will shape that reinvention. We hope their actions make the Christmas lights shine a little brighter above our retail destinations this year.
By David Lonsdale, Director, Scottish Retail Consortium
This piece was originally published at The Herald