SRC: Scottish grocers face highest UK business rates with proposed surtax

SRC: Scottish grocers face highest UK business rates with proposed surtax

A new analysis by the Scottish Retail Consortium (SRC) has found a Scotland-only business rate surtax being considered by Scottish Ministers would leave larger grocery stores here facing by far the highest business rate bills in the UK.

It follows the announcement on Thursday when Northern Ireland became the last of the four home nations to set its business rate for the 2024-25 financial year.

In its Scottish Budget on 19 December the Scottish Government revealed it was considering the introduction of a business rate surtax on larger grocery retailers, to “sustain the public finances”. A previous version of the surtax was in place from 2012 to 2015, and cost those firms affected £96 million.

Scotland’s business rate is set to soar to 55.9p in the pound in April for larger commercial premises, its highest rate in the twenty-five years since devolution. If a surtax comparable to the 2012-15 model were added on top this would mean larger grocery stores in Scotland would face by far the highest business rate in the UK, at circa 69p in the pound. It would see these stores taxed twice and push up their business rate bills by a further 23%.

Food retailing is historically a low profit margin sector and has amongst the lowest profit margins of any industry sector. A study by the Competition & Markets Authority last July found food retailers’ profits had shrunk from 3% to just 1.8% of revenues, reflecting increases in commodity prices but also their efforts to keep down prices for customers.

Last month an analysis by the SRC found grocery stores would require approximately £1 billion of additional retail sales each year if they had to cover the cost of a new Scotland-only business rates surtax.

David Lonsdale, director of the Scottish Retail Consortium, said: “Scottish Ministers are at risk of giving Scotland a reputation for higher taxes and regulation and lower growth than the rest of the UK.

“The consideration being given by Scottish Ministers to an arbitrary business rates surtax on grocery stores is troubling. Thwacking grocery stores with the highest business rate in the UK and treating them like a milch cow would breach government promises on business rates.

“It would also mark a decisive departure away from the pledge to finally restore rates parity with England.

“A surtax would have real world implications and unintended consequences for retailers, store colleagues, and customers. If the state of the devolved public finances turns out to be worse than feared then presumably it opens the door to other economic sectors being similarly targeted. The sooner this surtax is shelved the better.”

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