Scottish pubs could close 'for good' unless business rates are cut

The UK Government has announced a further year of 75% rates relief for businesses south of the Border but the Scottish Government is facing a £1.5 billion black hole largely due to funding cuts by Westminster and high inflation.

The Scottish hospitality sector is an important part of the Scottish economy, supporting £1.6bn of economic activity and 228,000 jobs but 9% of outlets are planning to close or considering options, according to a survey by the Scottish Licensed Trade Association (SLTA).

Permanent closures in the sector are already more than one-third higher than the whole of last year and are accelerating at double the rate in Scotland than in England.

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Lanarkshire bar and nightclub owner John McMillan acknowledged the problem facing the Scottish Government but warned more closures are imminent if there is no help for the ailing hospitality sector.

“We know they are not getting the money from down south and that if they give us a rate cut, they have got to get the money from elsewhere, but our sector is really struggling,” he said. “A pub or club is shutting every three days and a lot of the ones that are left will shut for good after Christmas if there is no assistance.”

East Kilbride bar and nightclub owner Joe Keenan echoed the assessment of the situation.

“It’s grim just now as they are closing at an alarming rate – two or three a week is fairly accurate,” he said.

“We are at our wits’ end with it now – the cost of living crisis is hitting hard and over and above that the business rates situation is crippling us.”

Keenan added that businesses’ rateable values were based on 2017 incomes which were generally higher than they are now.

“We estimate we are paying three times what we should be paying,” he said. “We have appealed but so has everyone else and now there is a backlog. Earlier this month, we had a letter saying they were anticipating getting round to looking at it in the spring of 2024 but in the meantime we have still got to pay it out. It is frustrating because places are closing due to the high bills.”

Keenan said that the current high VAT rate, which is set by Westminster, should also be cut to save businesses.

UKHospitality Scotland executive director Leon Thompson said: “Scotland’s hospitality sector is experiencing an extremely worrying trend with, for example, pub closures reportedly running at double the rate they are in England.

“This is due in large part to the lack of support in last year’s Scottish Budget when the Scottish Government chose not to pass on the 75% relief on business rates that counterparts in England and Wales benefitted from.

“It isn’t just pubs that are impacted, but hotels, restaurants, cafes and coffee shops too. Right now, our businesses are grappling with an increase in business costs of around 43%. This is due to inflation, rising energy costs – which are not capped for business in the way they are for households – and wage increases, resulting from the extremely tight labour market.”

He said that if the 75% rates relief was not implemented in Scotland many businesses would have no option but to reduce opening times further, cut their workforce and stall any plans for investment.

“Others may have no option than to close for good,” said Thompson.

In a joint statement, the SLTA and Scottish Beer & Pub Association (SBPA) said the failure to pass on rates relief last year was a “devastating blow” for Scotland’s pubs and bars and had resulted in a record number of permanent closures.

“Many businesses are still saddled with debt incurred during the pandemic and have been unable to recover with the increased financial pressures in the aftermath, including sky-high energy prices, inflationary pressures and impacts to supply chains,” they said.

“The next financial year will also see increased costs in the form of wages, with increases to minimum wages, which will need to be paid for directly by businesses.

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“The rates relief in England will help businesses there with this increased cost but unless the Scottish Government passes on the support, pubs and bars north of the Border will be left to entirely fend for themselves and the rate of closures will only increase.

“The Scottish Government must ensure that the rates relief is passed on in full or it will cement further closures in the sector, directly resulting in job losses and blows for communities across the country.”

Night Time Industries Association (NTIA) Scotland is also calling on the Scottish Government to implement the 75% business rates discount.

“Over the past two years, Scottish small and medium enterprises (SMEs) have faced disproportionately high business rates, paying up to £93,000 more than their counterparts in England and Wales,” said a spokesperson.

“This stark imbalance has resulted in a distressing surge in business closures across Scotland, now occurring at a rate twice that of England.

“This situation presents a critical test for Humza Yousaf’s government, as the budget becomes a litmus test for the much-touted New Deal For Business.

“We eagerly await to see if it will lead to a meaningful reset of the business-government relationship, demonstrating prudent policy-making that safeguards Scotland’s future tax base, or if it remains mere rhetoric devoid of tangible action.”