Third of firms want to see business rates cut, survey finds
Survey Reveals Growing Concern Over Business Rates in Scotland
Third of firms want to see business - According to the latest Understanding Business survey, a significant portion of Scottish businesses (32%) are advocating for reductions in their business rate obligations. This sentiment has emerged as firms grapple with escalating operational costs, with 69% reporting increased financial pressures. The findings highlight a critical juncture for the Scottish economy, as businesses prepare for potential challenges in sustaining growth and profitability.
Cost Increases Prompt Pricing Adjustments and Strategic Delays
The survey, which polled over 500 companies across Scotland, reveals that more than half of businesses (51%) have raised prices in response to higher business rates. This trend underscores the direct impact of rate hikes on market dynamics, as companies seek to offset expenses. Additionally, over a quarter (27%) of affected firms have postponed expansion plans, indicating a cautious approach to investment amid uncertainty.
Some businesses have adopted alternative strategies to manage costs, such as relying on savings or reinvesting capital to cover additional expenses. However, a notable 18% have implemented new charges, and 14% have opted to reduce staffing levels. These measures, while necessary for short-term survival, may signal broader concerns about long-term competitiveness and operational flexibility.
Ministers Face Pressure to Address Rate Hikes
Malcolm Robertson, a founding partner at Charlotte Street Partners, emphasized the urgency of addressing the business rates issue. He stated,
"The business rates regime is little more than a tax on employers of people, of those who work for them and on the things that might give us comfort in difficult times, like going to the pub or out for a meal or on holiday."
Robertson further warned that the current tax structure is “not fit for purpose,” with repeated adjustments failing to stimulate economic activity. He called for immediate action, arguing that lowering business rates and UK-imposed employer taxes would restore confidence and encourage investment in job creation.
Survey Highlights Mixed Outlook for Scottish Businesses
Scott Edgar, senior research manager at the Diffley Partnership, noted the survey’s findings reflect a “mixed picture” for Scottish enterprises. While some indicators remain stable, there is a notable uptick in firms anticipating the need to raise prices in the coming months. This shift aligns with a broader increase in concerns about business survival, reaching its highest level since March 2024.
Edgar also pointed out a decline in government-business confidence, with fewer companies feeling assured that policymakers are effectively responding to their needs. Despite this, a majority of businesses still view Scotland as a favorable location for operations, though the underlying optimism is increasingly tested by persistent cost challenges.
Scottish Government Launches Review of Business Rates
In response to the survey’s conclusions, Deputy First Minister Jenny Gilruth announced that the Scottish Government has initiated an independent review of “anomalous” business rates hikes. This move aims to assess the impact of recent rate increases and evaluate potential reforms. The review will also examine the outcomes of the 2026 non-domestic property revaluation, which has been a focal point of debate among stakeholders.
A Scottish Government spokesperson reiterated their commitment to addressing business concerns, stating,
"The Scottish Government has listened to the concerns of businesses, which is why Deputy First Minister Jenny Gilruth this week announced a comprehensive review of non-domestic rates."
The spokesperson emphasized that the review will prioritize clarity and transparency, working closely with industry leaders to refine the tax framework and support economic growth.
Key Implications for the Economy
The survey underscores the interconnectedness of cost pressures and business decision-making. With 32% of firms identifying rate reductions as the second most popular policy option, the demand for fiscal relief is clear. This aligns with the broader call for tax cuts, as 40% of respondents support a general reduction in taxation to foster a more dynamic economic environment.
Analysts suggest that these findings could influence future policy directions, particularly as the Scottish Government seeks to balance revenue generation with the need to sustain business activity. The review of non-domestic rates is expected to explore how adjustments might alleviate financial strain and restore confidence in the sector. For instance, reducing the tax burden could incentivize companies to invest in innovation, training, and infrastructure projects, which are crucial for long-term growth.
Moreover, the survey highlights the importance of addressing cost-of-living pressures, which have become a defining challenge for Scottish businesses. While rate hikes are a significant factor, they are compounded by rising energy prices, wage costs, and supply chain disruptions. The government’s ability to implement reforms that tackle these multifaceted issues will be critical in determining the sector’s resilience and future prospects.
Call for Immediate Action
Robertson’s critique of the current tax system has sparked calls for immediate intervention. He argued that the existing structure disproportionately affects small and medium-sized enterprises, which often lack the financial buffers to absorb additional costs. By simplifying the rates framework and reducing its complexity, the government could create a more equitable system that supports businesses of all sizes.
Meanwhile, the Diffley Partnership’s analysis suggests that while the Scottish economy remains stable, businesses are increasingly anxious about their ability to thrive in the face of sustained cost pressures. The review of non-domestic rates is seen as a pivotal step toward addressing these concerns, with the potential to unlock investment and drive job creation. However, the success of the initiative will depend on its ability to deliver tangible solutions and align with the evolving needs of the business community.
As the Scottish Government moves forward with its review, the focus will likely shift toward creating a more responsive and supportive tax environment. This includes not only evaluating rate adjustments but also exploring broader fiscal policies that can help businesses navigate economic uncertainty. The ultimate goal, as Robertson and others have stressed, is to foster an atmosphere where companies can operate with confidence, ensuring Scotland remains a competitive and attractive hub for enterprise.