A FRESH forecast from colleagues in the British Retail Consortium (BRC) suggests the total value of retail sales in the UK will increase by up to 3.5 per cent in 2023.

At first blush this seems encouraging for a sector that directly employs almost three million people across the UK, including 230,000 in Scotland, and which has been buffeted by two years of Covid pandemic and the costs crunch.

However, as has been the case for much of the last six months, the rise in the value of sales is expected to be more than outweighed by shop price inflation that is likely to remain elevated.

As such, retailers’ overall volumes will edge down as customers carry on having to pay a bit more for fewer items, despite fierce competition keeping retailers on their toes and working hard to keep down prices for customers.

The BRC’s outlook for the second half of this year is a little more optimistic, as inflation, it is hoped, subsides and consumer confidence perks up.

Of course, economic forecasting is fraught with caveats and notoriously tricky.

There are so many variables to contend with. These include the continuing conflict in Ukraine and its knock-on effects on the supply of energy and some foodstuffs, the shallowness or otherwise of the downturn, and the next steps the

UK Government may or may not take with its energy relief scheme for firms.

What the forecast does underline is the need for policy makers to bear down on inflation and to prioritise economic growth.

Thankfully, the Scottish Government took a useful step in this direction in its Budget a couple of weeks ago.

The backdrop to the unveiling of the £45 billion tax and spending plan was inevitably dominated by the shadow of the costs crunch, coupled with sobering Fiscal Commission projections for growth, unemployment, and living standards.

Retailers breathed a sigh of relief at the decision to freeze the business rate. The industry accounts for 22% of the £3bn raised each year from rates. The freeze shields Scotland’s retailers from a £60 million tax rise at a time when stores are grappling with spiralling costs and an uncertain outlook.

This is good news for hard-pressed retail destinations.

That said, the freeze should not be the limit of the government’s ambition on rates. The burden remains onerous, with the business rate having escalated to its highest level in 24 years.

Over and above this, 12,000 medium-sized and larger commercial premises – a quarter of which are shops – continue to pay a higher business rate than counterparts or competitors down south. Little explanation has been forthcoming as to why firms in Scotland are thought to be better placed to stump up more in rates.

Moreover, as companies begin to digest the full implications of the Scottish Budget there is a growing disquiet amongst smaller firms, principally over the omission of any additional rates relief comparable to that which retailers, hospitality, and leisure premises in Wales and England are entitled to for the coming year.

In addition, a change to thresholds means fewer companies are eligible for the 100% exemption as part of the small firms’ rates relief scheme.

All of this reinforces the need for a recasting of business rates for the years ahead.

This should begin with a timetabled plan for returning the poundage to a permanently lower level, coupled with a faster restoration of the level playing field with England on the higher property rate.

Taxpayers on modest earnings will be relieved by the Scottish Government’s decision not to increase income tax rates this spring. However, the freezing of the thresholds and increased income tax rates for higher earners is likely to take a bite out of consumer spending.

Given the weak economy, it is imperative UK and Scottish ministers keep in mind the fragile condition of businesses right now. They ought to think twice about any further regulatory measures that burden businesses.

It will be a long road to full recovery for companies just as much as it will be for public sector finances.

David Lonsdale is director of the Scottish Retail Consortium.