Scottish Budget wish-list from retailers haunted by costs

So retailers are haunted by the past, but also by the present. Shops are still counting the cost of the Chancellor’s Budget. The eye-watering hike in employer’s national insurance contributions disproportionately hits retail, as it’s the country’s largest private sector employer and because it employs large numbers in entry-level and part-time roles. So great has been the concern that many of Scotland’s leading retailers wrote to the Chancellor, including the likes of Dobbies, Schuh, Scotmid, and The House of Bruar.

The tax hike will add £190 million a year to the sector’s outlays in Scotland. Given retail’s low profit margins, this is the equivalent of having to sell an extra £3 billion of goods each year to offset the cost and maintain margins. With consumer spending becalmed, retail sales flatlining, and shopper footfall down, any notion of a double-digit increase in sales revenues is wholly unrealistic.

The sheer scale of the tax hike and short timeframe for implementation means retailers need to act. This will involve a mixture of job shedding, curbs on pay growth and hours, shelving stores, and passing the cost on in higher prices.

It comes when other UK measures will also require significant outlays, including the above-expectations rise in the statutory living wage and extended producer responsibility levy for packaging.

All this makes for a fundamentally different outlook as retailers contemplate the Scottish Budget, or to stretch the metaphor tortuously, the ghost of Christmas yet to come in this year’s Budget. Like Scrooge’s workers and clients, retailers are hoping there will be a festive celebration in the finale.

The first thing on the retail industry’s festive wish list to the Finance Secretary echoes the Hippocratic oath declared by medics - first do no harm. Don’t do anything that compounds the costs crisis retailers face.

The record sums heading to Holyrood as a result of Barnett consequentials emanating from the UK Budget should make things easier for Ministers. However, this is a short-term boost and not an excuse for avoiding reductions to the cost of government, otherwise it simply stores up problems for the future.

So what else is on retail’s Christmas list?

It is unconscionable that Ministers could compound the costs crunch by introducing a surtax on grocers. They should clearly state such a tax has been ditched. Throughout the Budget and accompanying tax strategy should be a steely focus on competitiveness.

That means levelling the playing field with England for firms paying the higher property rate, which includes 2,400 Scottish shops.

Ministers should blunt any increase in business rates, which are at a 25-year high. Even an inflationary uplift adds £13 million to retailers’ bills.

Rates relief should be restored for smaller retailers. This would help smaller stores alleviate the Chancellor’s tax hike and support retail destinations. It would also send a positive signal at a time when the UK administration has said it recognises the rates burden on retail is disproportionately high and envisages introducing a permanent rates reduction for the sector from 2026.

The industry knows there is a symbiotic relationship between small and large stores, each relying on each other to thrive and succeed. They have much more in common than they do differences. Unfortunately, policymakers rarely understand this, and fail to support all shops, too often taking the industry as a whole for granted.

Our final Christmas wish is for Ministers and MSPs to collaborate and pass a pragmatic pro-business Budget. Dickens managed to finish off his tale with a happy ending; retailers will hope asking for the same isn’t too much.

David Lonsdale is director of the Scottish Retail Consortium