A retail leader has called for changes to the cost of doing government to ease the need for tax rises on businesses.
Across the UK the rise in employer’s national insurance contributions and lowering of the threshold on which it is payable will add £2.3 billion to shop owners’ outgoings – £190m of that in Scotland.
David Lonsdale, director of the Scottish Retail Consortium, says that in Scotland “this is the equivalent of having to sell an extra £3 billion of goods each year to offset the cost and maintain margins.”
There is also £7.6m in additional business rates awaiting shop owners, assuming the Scottish Budget is passed over the next few weeks.
“All of this cannot simply be absorbed and will have consequences for staffing levels, commercial investment and the viability of stores, and for prices charged to customers,” adds Mr Lonsdale.
The Scottish government is not passing on the Chancellor’s 40% rates relief package for retailers from April, restricting the discount north of the border to the hospitality sector.
Apart from demanding a fairer deal for retailers, Mr Lonsdale says there is “a pressing need for new thinking about how and which services are delivered and how government can deploy its resources more efficiently”.
He argues that structural changes are needed to reduce the cost of government, including fewer public bodies, a reduction in civil service headcount, and an end to the policy of no compulsory redundancies.
“Thinking differently in this way can lead to less pressure to further increase taxes, as growing the economy is the only sustainable way to generate greater tax revenues.” he says.
“With the business rate rising to a 26-year high a more ambitious agenda is required. UK Ministers have acknowledged that the rates burden on retail is disproportionate and have announced a permanent rates reduction for the sector in England from 2026.
“We need to see similar recognition here along with a permanent cut to business rates for all retailers in Scotland, otherwise stores risk being left behind and put at a further competitive disadvantage.”
Empty shop unit in Princes Street, Edinburgh (pic: Terry Murden)
A Scottish Government spokesperson insisted the Scottish Budget delivers a competitive, non-domestic rates regime including a freeze to the Basic Property Rate delivering the lowest such rate in the UK for the seventh year in a row and maintaining the lowest property tax rate in the UK for over 95% of non-domestic properties in Scotland.
“The Budget also provides a package of reliefs worth an estimated £731 million, including the Small Business Bonus Scheme which is the most generous of its kind in the UK,” said the spokesperson.
However, the bleak outlook is confirmed in figures from the Centre for Retail Research which showed 169,395 jobs were lost this year, up 49,990, or almost 42% on 2023. It was the highest annual reading since 2020, when Covid resulted in the widespread shuttering of shops and the loss of more than 200,000 jobs.
There were also 13,479 store closures this year, an increase of 2,985, or 28.7%, on 2023. The centre warned: “We are expecting worse to come in 2025.”
It found that 38 major retailers went into administration during 2024, inevitably grabbing the headlines, though independent retailers, typically small businesses with between one and five stores, were responsible for 65% of all store closures. They shed a total of 58,616 workers.
Professor Joshua Bamfield, director of the Centre for Retail Research, said: “The problems of changed customer shopping habits, inflation, rising energy costs, rents and business rates have continued and forced many retailers to cut back even more strongly in 2024.”
He warned of a bleak outlook for the year. He said that “by increasing both the costs of running stores and the costs on each consumer’s household it is highly likely that we will see retail job losses eclipse the height of the pandemic in 2020”.
