Will Scotland's next First Minister really "get" business?

It is barely more than a year since Mr Yousaf emerged victorious from an SNP leadership contest which pitted him against Kate Forbes (who is once more in the running for the job) and Ash Regan, who has since joined Alex Salmond’s pro-independence Alba Party.

Early signs from Mr Yousaf’s administration were encouraging, including the decision to jettison controversial proposals to radically tighten alcohol advertising and marketing, and moves to establish a New Deal for Business. The latter followed criticism from some quarters that the previous government led by Nicola Sturgeon did not "get" business.

That the UK Government effectively blocked the introduction of Scotland’s much-maligned deposit return scheme also appeared to ease the pressure on Mr Yousaf, albeit its derailment came at a cost to the taxpayer. The Scottish National Investment Bank admitted in October that it would lose £8 million of the £9m of funding it had provided to Circularity Scotland, the company set up to run the DRS, after it fell into administration.

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Since those early days, however, it is probably fair to say that the faith business had shown in Mr Yousaf gradually began to fade. The hospitality sector has arguably been the most dissatisfied with the way things turned out during Mr Yousaf’s tenure, though there has been criticism too from retailers, amid plans by the Scottish Government to introduce a business rates surtax on large stores.

Much of the erosion of confidence felt by the hospitality industry can be traced back to what it perceives to be a lack of support on business rates. Scottish hospitality groups mounted a high-profile campaign calling for up to 75% relief from business rates – a concession currently being made by the UK Government to firms in the hospitality, retail and leisure sectors in England – in the run-up to the announcement of the Scottish Budget for 2024/ 2025 in December.

The industry argued strongly that such relief would significantly ease the financial burden facing operators as the cost of energy, labour, food, drink and insurance spiralled, and bring parity with its counterpart south of the Border.

Campaigners noted the money was there for the Scottish Government to do this because of £230 million of Barnett consequentials provided by Westminster in the Autumn Statement. But in a Budget reflecting the straitened state of the Scottish public finances, Finance Secretary Shona Robison decided there were bigger priorities. Faced with a reported £1.5 billion hole in the coffers, Ms Robison prioritised investment in the hard-pressed NHS, as cuts in housing, transport and social justice were made to the Budget for 2024/25.

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That is not to say the Scottish Budget offered no support for business. Ms Robison retained the much-valued small business bonus scheme, introduced 100% relief from rates for hospitality businesses in the Scottish islands, and held the basic property rate poundage at 49.8p. She also won approving nods for pledging to examine the way business rates are calculated for the hospitality sector, which has long been a bugbear of sector representatives.

But, as the industry responded to news of Mr Yousaf’s departure this week, it made clear it was not enthralled with the way things evolved under the outgoing First Minister. “We initially welcomed Mr Yousaf’s pledge to reset the Scottish Government’s relationship with business in the wake of turmoil caused by the Covid pandemic, Brexit and misplaced legislation when he was named as Scotland’s new First Minister just over a year ago, in March 2023,” said Colin Wilkinson, managing director of the Scottish Licensed Trade Association.

“However, that early enthusiasm clearly waned as hospitality businesses and the licensed trade have continued to struggle since his arrival in Bute House and there appears to have been no real understanding – or willingness to understand – the myriad problems and challenges facing what is one of the biggest employers in Scotland.

“One of the key asks of the new regime at Holyrood is to work with us to find a meaningful solution to change the current non-domestic rates system which is hugely outdated and in need of reform.”

Turning to potential successors, much attention has focused on the prospects of Kate Forbes and John Swinney becoming the next inhabitant of Bute House and leader of Scotland’s devolved administration, though there are other names in the frame, such as Neil Gray and Jenny Gilruth. 

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Ms Forbes, a former Scottish Finance Secretary, won plaudits from the drinks industry during last year’s SNP leadership contest for what was seen as her more supportive approach to business. Perhaps mindful of the economic importance of the Scotch whisky industry to her Skye, Lochaber, and Badenoch constituents, she made clear her opposition to the ban on alcohol advertising which had been proposed towards the end of Ms Sturgeon’s tenure. Ms Forbes also highlighted her concerns over the deposit return scheme, branding it “an example of a good idea badly executed”.

John Swinney, who was installed as the early favourite to succeed Mr Yousaf, has arguably not had the profile of Ms Forbes in recent months. But there is no doubt he will be viewed by many as a safe pair of hands. He is a highly experienced political operator who has previously served as Deputy First Minister and Finance Secretary and has also held the education brief.

It is also fair to say that Mr Swinney would not have to contend with the distraction faced by Ms Forbes on account of her religious and moral views as a member of the Free Church of Scotland. She has previously said she would not have voted for gay marriage in 2014 and claimed having children outside marriage was “wrong according to my faith”. However, she said would not act to change existing law if she became First Minister.

Regardless of who prevails, the next First Minister of Scotland will have many priorities. And one should be finding a way to address the lingering perception that the SNP still does not really  "get business" or understands the importance of sectors such as hospitality to the Scottish economy.

“Whoever becomes the next First Minister has a big opportunity to start afresh with businesses," said Leon Thompson, executive director of UKHospitality Scotland. "Warm words are all we have heard recently, with very little action.

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“The next leader of the Scottish Government needs to change that and recognise hospitality and tourism as the economic giant and vital partner it is, with the ability to showcase Scotland around the world.

“Our sector is a major employer and driver of economic growth, as well as being central to our communities and culture. The sector wants to grow and has the potential to deliver even more, but costs needs to be rebalanced and reduced to unlock the investment to achieve that.

“That includes not burdening the sector with regulation that hinders its ability to operate, like the alcohol and marketing proposals, and undertaking proper consultation with businesses on any new legislation.”