FEARS that swathes of Scotland’s pubs, restaurants and hotels will be forced to close after business rates were increased have prompted trade leaders to raise the prospect of boycotting the controversial charges.
Pubs are currently estimated to be closing at a rate of three per week – or around 150 per year – with grave expectations that numbers will rise as sales continue to slide because of the reduction in the legal drink-drive limit.
Hostility to the massive upsurge in rates is growing within the licensed trade – which is worth £1.5 billion to the Scottish economy – amid claims some operators will see a four-fold rise to their charges.
Read more: Donald Macleod - Holyrood has buried its head in the sand over rates
The rates increase comes after thousands of outlets saw their property values soar in the latest valuation of non-domestic property in Scotland, in some cases by as much as 400 per cent. It effectively means business owners will have to pay thousands of pounds more per year for council services, sparking fears that hundreds will simply be unable to afford the new bills.
In an echo of the 1989 campaign against Margaret Thatcher’s Poll Tax, industry leaders have warned that a mass non-payment of rates could be an option if the policy is not reviewed by the Scottish Government.
Paul Waterson, chief executive of the Scottish Licensed Trade Association (SLTA), said: “There are people who are going to lose their business because they can’t afford to pay it.
“There are a lot of people who say they are not going to pay because they can’t.”
And he added: “This is the licensed trade’s Poll Tax moment.”
Scottish assessors used property rental values that prevailed in 2015, the so-called “tone”, to set rateable values for 2017. Those values are multiplied against a figure known as the poundage – now set at 46.6p in the pound – to arrive at a premises’ rates bill.
But in the past two years hundreds of outlets have seen takings fall sharply following the reduction in the drink-drive limit. That change, which took effect in later 2014, is continuing to exact a heavy toll, with nearly one half of outlets having been found to have seen a fall in sales over the Christmas and New Year trading period.
Read more: Paul Waterson - A punitive tax on the trade which cannot be justified
Industry sources fear the rates will have a worse effect on the industry than the smoking ban did in 2006.
The licensed trade in Scotland has also been heavily hit by the cost of meeting huge changes in licensing regulations in the past decade.
But it is not just pubs which are feeling the pressure within the hospitality sector. The Scottish division of the British Hospitality Association (BHA) estimates that rates bills for hotels in Scotland have risen by an average of 92 per cent. It cites one mid-market hotel in a city centre location, trading under a major brand, which has seen its annual bill go up by a staggering £75,000 per year, based on the draft valuation. That equates to a £1,500 increase in business rates per week.
In addition, the licensed trade believes it is treated unfairly by assessors because, unlike sectors such as retail, outlets’ turnover is taken into account when calculating bills.
A review of business rates, led by former Royal Bank of Scotland heavyweight Ken Barclay, is expected to report its findings in the summer. But there are fears this will come too late for many businesses, with the new rates are due to take effect on April 1.
Read more: Herald View - Rates rise puts so many jobs at risk
Willie Macleod, executive director of BHA Scotland, urged the Scottish Government to put the new valuations on hold until the findings of the Barclay review are published. He said: “The Scottish Government can’t continue to hide behind the independence of the assessors – this is a serious business and economic problem for Scotland. The Government is going to have to get a grip of it. It should suspend the new valuations until we see what Barclay comes out with.”
Warning that huge numbers of jobs will be lost if the valuations go ahead, he added: “We will see investment reduced in our industry, we will see people not investing back in the quality of the product. I am quite sure we will see businesses going on to the market if there is somebody out there to buy them, and I am quite sure we will see businesses closing.”
Across the pub industry some 40 per cent of businesses have seen their rates bills increase following the valuation, with instances of rateable values rising four-fold commonplace. One bar in Aberdeen has seen its draft rateable value rise to £81,500 from £21,000.
Elsewhere, one pub in central Edinburgh has seen its rateable value rise by more than 110 per cent, from £24,100 to £51,000, while a bookmaker in the same street saw a more its increase by just 12.1 per cent, from £24,000 to £26,900.
Graeme Arnott, a director of Edinburgh pub giant Caledonian Heritable, said the company was looking at a 20 per cent rates increase on average across its 60 managed houses.
Glasgow nightclub boss Donald MacLeod claimed the methodology for calculating rates was flawed.
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