Retailers have warned that department stores in Scotland’s city centres are being put at risk as they bear the brunt of a £16 million increase in their annual business rates bills next year.
The Scottish Retail Consortium said spiralling business rates bills were damaging beleaguered high street businesses and called on the UK and Scottish government to freeze the levy.
The call coincided with the publication of inflation figures, which are used to calculate the amount of business rates that firms will have to pay next year.
Yesterday’s ONS Consumer Price Index (CPI) measure of inflation put the rate for September at 2.4 per cent compared with the 2.7 per cent recorded in August.
The September inflation figure is used by the UK government to calculate the non-domestic rates multiplier for the following year. In last year’s Budget, the UK government committed to set the rise in line with CPI, having previously used Retail Price Index measurement, which gives a larger figure for inflation.
The Scottish Government also used CPI to calculate the Scottish non-domestic rates poundage in last year’s Budget.
According to the SRC, if the Scottish Government take the same approach when it unveils its budget in December, Scottish retailers will face an extra £16m on their annual business rates bill from April next year.
Ratepayers as a whole in Scotland would see a £73m hike in their rates bills.
Should the Scottish Government not repeat last year’s decision to limit rises to CPI, but instead use RPI, which is 3.3 per cent, the SRC calculated the £16m figure could rise to more than £21m.
Businesses most affected by business rates are either those in highly valued areas such as city centres or those operating from larger properties. That means department or large clothing stores tend to be the most affected.
According to the SRC, those stores are in most direct competition with online competitors. The SRC pointed out Scottish businesses also pay a higher large business supplement in Scotland and all ratepayers who operate out of town face the prospect of a new rates surcharge under minsters’ plans.
SRC head of policy Ewan MacDonald-Russell said: “The spiral of ever-increasing rates bills is a crucial factor in the struggle faced by property-based retailers to survive. It’s absurd to pretend it’s sustainable to continue heaping this burden on these businesses.
“That’s why retailers are calling on the Chancellor to freeze business rates this year – and why we want the Scottish Government to follow suit. The retail industry is the engine of the Scottish economy. The Government needs to reduce the strain if it doesn’t want to cause irreparable damage.
“Rising rates bills affect the whole retail industry disproportionately. However, for some retailers, especially those operating in desirable city centres such as Edinburgh or from large buildings, this will be a particularly bitter pill to swallow. Businesses such as large department stores which are already investing heavily in online operations and in keeping prices competitive are likely to find any increases very onerous, adding to the considerable pressure they already face.
“Inflation raises two big challenges for the retail industry. Consumers face higher bills, which limits their ability to spend on discretionary items. That particularly impacts high-street retailers whose non-food products are exactly those consumers have cut back on this year.”
Scotland’s high streets have had to withstand much turbulence over the past few months. Businesses such as House of Fraser, Poundworld, Maplin, Toys ‘R’ Us have been forced into administration.
A Scottish Government spokesperson said: “We are committed to delivering the Barclay Review as part of our commitment to maintaining a competitive non-domestic rates regime for businesses in Scotland. We have consulted widely on its implementation and are currently analysing responses to inform the delivery of these reforms.”