By Scott Wright

SCOTTISH business groups have been left underwhelmed over attempts by Chancellor of the Exchequer Rishi Sunak to mitigate surging energy bills, on a day when official figures showed that inflation had risen to 6.2 per cent.

The Federation of Small Businesses in Scotland warned that more action may be needed to help firms absorb soaring energy costs, after Mr Sunak cut fuel duty by 5p per litre for 12 months, but elected to not impose a windfall tax on oil and gas giants currently profiting from the surge in commodity prices.

And hospitality groups were disappointed by the lack of further support for their sector, with Mr Sunak ignoring fierce lobbying to press on with plans to return value-added tax in the sector to 20% in April.

While much attention was focused on changes made by Mr Sunak to the national insurance threshold, measures designed to support business appeared limited. Mr Sunak pledged to increase the employment allowance by £1,000 to £5,000 to help smaller firms, and unveiled plans to examine how to improve technical skills, boost productivity and unlock investment in research and development. R&D tax credits will be reviewed and relief will be extended to include data, cloud computing and pure maths.

The forthcoming business rates relief for the hospitality, leisure and retail sectors in England, which take effect from April and will offer discounts of 50% on bills, up to £110,000, was previously announced.

Andrew McRae, policy chair of the FSB in Scotland, said: “The Chancellor’s measures today will buy Scotland’s small businesses an inch of breathing space. Taking action to increase the employment allowance, as FSB suggested, will help local and independent businesses absorb some of the increasing costs of sustaining jobs. And by reducing fuel duty, the UK Government is helping every small business reliant upon their vehicle for their livelihood, like the rural tour guide that drives a minibus or the plumber who transports their tools in their van.

“There was little however for smaller firms facing overwhelming increases in their energy bills. This was a glaring omission when these operators have none of the protections of households nor the negotiating power of big businesses. Action is still required on this front or we face businesses that survived Covid being pushed to the brink by soaring utility costs.”

Tracy Black, director of CBI Scotland, said: “The Chancellor has taken steps to sustain confidence in our economy. They are welcome but don’t do enough to tackle the current challenges facing firms.”

Paul Waterson, spokesman for the Scottish Licensed Trade Association, said the return of VAT to 20% for pubs is a “bitter blow for hospitality businesses which are only just getting back on their feet as they recover from the pandemic”.

Mr Waterson said: “Our hope was that there would be a freeze at the current 12.5%. There is no doubt that returning to 20% will potentially jeopardise jobs and lead to price hikes at a time when the cost-of-living crisis is growing and bills for everyone are increasing. We have previously called for the permanent reduction of VAT for the hospitality sector to allow us to compete on a more level footing with our foreign competitors who enjoy much lower levels of VAT.”

Chris Jowsey, chief executive of Admiral Taverns, whose investors include Tennent’s Lager owner C&C Group, said: “I’m disappointed the Chancellor has not announced any new support measures for the pub and brewing industries... Industry trading volumes have not yet returned to pre-pandemic levels and it’s vital that the Government continue to invest in the sector at this critical juncture as support measures come to an end.”

British Chambers of Commerce said the latest growth forecast from the Office for Budget Responsibility “paint a bleak picture of the UK’s economic prospects over the near term”.

The independent OBR is now forecasting UK economic growth of 3.8 per cent, down from 6% forecast in October, amid the uncertainty brought by the war in Ukraine, high inflation and continuing supply chain pressure. The OBR forecasts business investment will grow by 10% this year, boosted by the “super-deduction” incentive which will allow firms to cut their tax bill by up to 25p for every £1 they invest.

Shevaun Haviland, director general of the BCC, said: “The spring statement falls short of the action businesses needed to see today. While there are some positive announcements that firms will welcome, it did not fundamentally address the huge cost pressures they are facing.

“Businesses will be pleased that the employment allowance has been increased. This long running ask of the BCC will provide a small amount of financial headroom for firms facing rising costs. But today was a missed opportunity to rebuild and renew the economy and ensure business has the resilience to weather the uncertain and volatile times ahead.”