BETRAYAL. Bitter pill to swallow. Extreme disappointment.

The language deployed by groups representing hospitality, tourism, and the night-time economy in press statements on Tuesday captured the profound unhappiness business representatives felt after the Scottish Budget failed to deliver the help that they wanted.

A co-ordinated and strongly argued campaign for 75% relief from business rates in the next financial year, as the hospitality, retail, and leisure sectors in England and Wales will benefit from, was ultimately rebuffed by the Scottish Government as ministers shuffled the pack to try and plug a reported £1.5 billion hole in the nation’s finances.

Given the overall tone of the Budget, which included the introduction of a new income tax band of 45% for those earning between £75,000 and £125,140, and spending cuts in housing, transport and social justice to protect investment in the NHS, it was perhaps not surprising there was little given over to support hospitality and tourism.

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It is certainly possible to feel sympathy for an industry which has gone through so much since Covid emerged, while also recognising the unenviable position the Scottish Government currently finds itself in with regard to the public finances (which, depending on your political viewpoint, is either down to the profligacy of the ruling SNP and Scottish Greens administration or the constraints on Scotland because it is not independent).

The UK Government's Autumn Statement provided £230 million of Barnett consequentials but, as the Fraser of Allander Institute noted in its analysis of the Scottish Budget, ministers chose to only earmark some of this for business rates relief. The small business bonus scheme was retained, which the Scottish Government said means 100,000 commercial properties will continue to be free from rates; 100% relief from rates was introduced for hospitality businesses in the Scottish islands; and the basic property rate poundage was held at 49.8p.

There was also a pledge to work with assessors to examine the way business rates are calculated in the hospitality industry, raising the prospect of a long-held complaint finally being addressed.

No one in the industry was suggesting on Tuesday that these measures were not welcome. The anger of lobby groups was focused squarely on the decision of the Scottish Government to not provide the same relief from business rates that the hospitality, retail, and leisure sectors in England and Wales have enjoyed this year, and will continue to benefit from in 2024/25.

Underlining the unity across the sector on the issue, the Scottish Tourism Alliance, UKHospitality Scotland, the Scottish Licensed Trade Association and the Scottish Beer and Pub Association expressed their “extreme disappointment” in a joint statement.

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“The lack of business support measures will see many thousands of tourism and hospitality businesses facing acute financial challenges in the next year, tipping many into crisis,” the statement said. “It also entrenches the fact that it is now immeasurably harder to run a hospitality, leisure, or tourism business in Scotland than anywhere else in Britain. This is particularly highlighted by the decision not to support the sector with rates relief, at a time when pubs in Scotland are already closing at twice the rate of those in England.”

At this juncture, it is worth contemplating where the tourism and hospitality industry goes from here.

Given the pressure on public finances, it is now surely unrealistic to expect the Scottish Government to provide any more financial support. It was hard to avoid the impression from the Budget that the bottom of the barrel has now been well and truly scraped, with measures such as relief from rates for island hospitality firms and the freezing of the poundage being all that the Scottish Government could afford on this front.

Indeed, the spending cuts that will now take place in other government departments underline the real pressure that the public purse is under.

So, while the frustration being felt by the hospitality industry is understandable, it was perhaps inevitable that no further support would be given.

In the absence of additional backing, the focus of the industry in the immediate term is likely to be on festive trading and hopes that enough takings will be brought in to tide operators over when their premises are inevitably quieter in January.

Anecdotally, it looks like it has been a busy Christmas so far, with footfall high in major cities such as Glasgow and Edinburgh. Consumers certainly seem to be determined to enjoy themselves, despite inflation and interest rates remaining high (while annual UK consumer prices index inflation inflation slowed to 3.9% in November, it was still nearly double the Bank of England’s 2% target).

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However, while the pubs and restaurants have been busy, it does not necessarily follow that big profits are being made, given the elevated costs that operators continue to face. The true test of Christmas, therefore, will come in January when the sums are totted up.

Industry groups have warned the decision to not provide 75% relief from business rates will leave many businesses facing “acute financial challenges in the next year”, raising the prospect that the recent worrying trend of closures will continue.

If that is the case, then it will be a new threat to the Scottish Government’s much-heralded hopes for a better relationship with the business community.

Those hopes were arguably damaged by this week’s Budget, which as well as falling short of hopes on business rates brought concern over the new income tax band, which groups such as Scottish Chambers of Commerce have warned will undermine Scotland’s ability to recruit people to senior posts.

Concern was also raised by the Scottish Retail Consortium yesterday over the prospect of a new business rates surtax being imposed on grocery retailers, which is being explored by ministers to help ease the pressure on the nation’s finances.

In a letter to Finance Secretary Shona Robison, SRC director David Lonsdale said that the “manner with which we learned of this possible new levy falls well short of the 'no surprises' element of the New Deal… let alone the New Deal principle of involving those potentially affected at the inception of policy development.”

He adds in the letter: “We are profoundly concerned that an arbitrary and Scotland-only levy is under consideration”.

All things considered, it seems the challenge facing the Scottish Government to improve its relationship with business has only just begun.