A Highland hospitality entrepreneur has declared it would be “unthinkable” for the Scottish Government to reject the industry’s plea for support at this week’s Budget.

Gavin Stevenson of the Mor-Rioghain Group, which owns music venues Gellions and The Highlander in Inverness, was commenting as calls mount in the sector for ministers to provide relief from business rates in the Scottish Budget for 2025/ 2026, which will be announced tomorrow (Wednesday).

Hospitality and tourism campaigners are urging the Scottish Government to match the support which was committed by Chancellor Rachel Reeves to the retail, hospitality, and leisure sectors south of the Border at the recent UK Budget. That will see firms in those sectors given 40% relief from business rates in the 2025/ 2026 financial year, up to a cap of £110,000 per business.

The support which will be given to retail, hospitality, and leisure firms in England in the new financial year will follow the 75% relief from rates which businesses in those sectors have benefited from south of the Border over the last two financial years.

However, Scottish firms in those sectors have not been entitled to similar relief, despite funding being made from Westminster via Barnett consequentials, although the Scottish Government has maintained the small business bonus scheme and introduced 100% relief for hospitality businesses in the Scottish islands.

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Mr Stevenson, who is the vice chair of the Night Time Industries Association (NTIA) Scotland, said the latest call for rates relief follows a hugely damaging spell for the industry, which has seen it come under huge pressure from the Covid-19 pandemic and subsequent inflation crisis. That cost crunch will be exacerbated by changes made by the UK Government at its recent Budget, which from April will see a 1.2 percentage point rise in employer national insurance contributions to 15% and a reduction in the level at which firms begin to pay contributions on each salary, to £5,000 from £9,100. An “above inflation” increase in the national living wage will also take effect from April.

“I think it would be fair to say that businesses in Scotland are facing the perfect storm of adverse conditions, and unfortunately a lot of that is very much a result of policy that is being driven entirely by the Scottish Government,” Mr Stevenson told The Herald.

“This is a storm everywhere, but it is the perfect storm in Scotland because for the third year now we have had no business rates support.

"In England and Wales there has been significant business rates relief, up to a value of £110,000 per year per business for the last three years. In Scotland, that money was sent to the Scottish Government via Barnett consequentials and the Scottish Government chose to spend it on other things, and pass none of that support on to Scottish small businesses.

“That means Scottish small businesses are going into this frankly very challenging and difficult Westminster Budget… already up to £300,00 worse off than the same businesses in England and Wales. So there is effectively a postcode lottery in the UK that says, if you are a business in Scotland, you are going to be adversely affected and put into a position where you are significantly financially worse off than the same business in England and that can’t be right.”

With the recent UK Budget providing a further £1.5 billion of funding for the Scottish Government via Barnett consequentials for the current financial year, and a further £3.4bn for 2025/26, Mr Stevenson said it was “incumbent upon the Scottish Government to now put in support for the current financial year, at least for the worst affected businesses”.

“Because at the moment we have got businesses failing in Scotland at double the rate than in England and Wales, in our sector anyway,” he added. “That is data that has come from the British Beer & Pub Association.”

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Mr Stevenson said: “It would be thinkable [for the Scottish Government] to not pass on the support, out of the three and a half billion that is coming through, to the hospitality, leisure, and retail [sectors] in the form of a 40% business rates relief, up to a value of £110,000 per business. That is identical to the support in England. And it is very cleverly designed, because effectively it targets small and medium businesses and it does exclude the larger operators that don’t need the support as much.”

Mr Stevenson said the changes announced by the Chancellor will result in the majority of hospitality and late-night venues facing an increase in costs of about £2,500 per employee. He expressed fear that the sharp increase in costs will lead to the loss of more important arts and cultural venues, as well as a reduction in employment opportunities for young people as they make their way in the world of work.

Mr Stevenson said: “To put that into perspective, for a typical small, hospitality premises that maybe has between 20 or 30 staff, that equates to £50,000 to £75,000 in additional costs. In the vast majority of cases, that is going to be more than the entire profit in that business.

“We already know from the BII (British Institute of Innkeeping) survey data released last week that we are now at the point where, because of the cost of doing business crisis and the hangover from Covid, we are now at the point where across the UK only one business in five in our sector is currently making a profit. There is no profit left in the hospitality sector for 80% of businesses.

“What that means in most cases is that the owners of those businesses are working for free, or if they are able to pull a wage it is significantly less than the minimum wage.”

He added: “The only way that businesses can try to compensate for these cost increases is to try and put up their pricing, but we are already in a position where we have had a hugely inflationary run. Inflation was just starting to come back down. But to put it into perspective, for a typical business in our sector, they would have to increase their prices by 11% just to cover the cost increase that the Chancellor has put though.”