What does business want for Christmas in next week’s Scottish budget?

“By backing the hospitality sector in the coming budget, the Scottish Government can help the industry to deliver more jobs and investment, turbo-charging economic growth and further supporting Scotland’s communities and high streets,” SHD director Stephen Montgomery said.

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Mr Montgomery’s comments come amid mounting concern in the retail sector over the increase in employer national insurance contributions announced by Chancellor Rachel Reeves at her October Budget. The industry has warned the increase will cost retailers in Scotland £190 million each year, starting in April, while also triggering job cuts and price increases at the tills.

That is why the FSB is urging Ms Robison to use some of the extra funding allocated to Scotland from the UK Budget to fund rates relief at 40% for the country’s retail, hospitality and leisure sector.

“Small businesses are being squeezed by a combination of rising costs and customers cautious about spending in a cost-of-living crisis,” said Andrew McRae, policy chair at FSB Scotland. “Many are operating on extremely thin margins and contemplating hard decisions as they try to protect staff jobs and secure their futures. 

“Our members tell us they need to see clear signs the Scottish Government understands these pressures and is taking action to address them.

“That means passing on the business rates relief which has been extended yet again for retail, hospitality and leisure businesses in England, at a rate of 40%. Their counterparts in Scotland are experiencing exactly the same challenges, yet have seen no additional relief since July 2022.”

There are also continuing concerns about the differential rate of income tax in Scotland, which organisations such as Scottish Financial Enterprise have said is “not working”. Ross Stupart, head of tax for accountancy firm RSM in Edinburgh, said many businesses see it as a barrier to growth.

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“Scotland’s current approach to income tax is making it more difficult to hire people, as they can pursue a career outside of Scotland, where there are more favourable tax treatments for employees,” he said.

“Freeports and investment zones are a good idea in theory as a mechanism to attract inward investment and stimulate economic growth, but businesses need to have confidence that they will be able to attract people with the right skills for these initiatives to work in practice.”

Any further information relating to rent controls will also come under keen scrutiny as the Housing Bill, which aims to improve the private renting experience for tenants, passed its first stage in the Scottish Parliament earlier this week.

The Scottish Property Federation (SPF) argues that the bill still fails to adequately acknowledge and the fundamental challenge facing the sector, which is a supply shortage. The SPF says this has been exacerbated by a 45% reduction in build-to-rent construction during the year to the end of October.

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“While we support proposals to boost critically needed new modern homes for rent of all tenures and we believe the proposals for consulting on the Bill’s framework powers for exemptions from the rent control regulations must be addressed to encourage and facilitate new housing investment for Scotland, given that at least £500m of investment could already have been lost as the policy of rent controls has been formed,” SPF director David Melhuish said.

More broadly, the business community is also looking for a joined-up plan to economic activity, as outlined by Marek Zemanik, senior public policy advisor for the Chartered Institute of Personnel and Development (CIPD).

“Significant public sector pay awards have provided a welcome boost to public sector employers and workers,” he said. “However, the Scottish Government needs a broader plan for growth that includes boosting private sector business investment in workplaces across Scotland.

“This will undoubtedly be a difficult budget, under challenging circumstances. But boosting business productivity across all sectors, and investment in skills and innovation must be high up the list.”