The Scottish Retail Consortium (SRC) has renewed its call for rates parity with England, following new data revealing that firms occupying larger commercial premises in Scotland will be required to pay £54.7m more than their counterparts in England in the 2025-26 financial year.
This rate increase, effective from 1 April 2025, has sparked concerns about the growing disparity in the cost of doing business north and south of the border.
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Higher Property Rate differential costs Scots businesses
The introduction of a Higher Property Rate differential means that Scotland-based businesses will face an additional 1.3p in the pound on their property rates compared to their English counterparts.
This tax burden is expected to impact various sectors, with retail businesses shouldering a substantial portion of the surcharge. According to recent figures, retail properties alone will contribute £9.1m to the £54.7m total.
Other sectors affected include hospitality, offices, and manufacturing, with hotels facing an additional £2.5m, offices £6.4m, and factories £9.3m.
In total, around 11,360 commercial properties in Scotland are subject to this surcharge, which applies to properties with a rateable value of £100,000 or more.
The slab tax system ensures that the higher rate is applied to each pound of a property’s rateable value, which further exacerbates the financial burden on businesses.
A long-standing issue
This issue has been a point of contention for several years.
The Barclay Rates Review, published in 2017, noted that the Higher Property Rate differential between Scotland and England was harming Scotland’s competitiveness.
The review called for the restoration of parity by Spring 2020, a goal that has yet to be realised.
The SRC, along with many other stakeholders, believes that the current rates structure discourages private sector investment in Scotland and increases the cost of doing business in the country.
David Lonsdale, Director of the SRC, expressed his concerns in a statement, calling the rates burden “damaging” and describing the disparity as an anomaly.
“There is a pressing need to lift private sector investment here in Scotland, yet firms liable for the Higher Property Rate continue to pay more than their counterparts in England, to the tune of £54.7m annually,” Lonsdale said.
At a time when retail sales and footfall are struggling to grow, these higher rates further complicate the already challenging environment for Scottish retailers.
Lonsdale added, “Shops account for £9.1m of this, making it even more expensive to operate a store on our high streets and retail destinations.”
Calls for a new poundage rate lock
The SRC has called for a new initiative to address this ongoing issue: a Poundage Rate Lock. The proposed measure would ensure that Scottish retailers never pay more in rates than their counterparts in England.
Lonsdale emphasised the need for the Scottish Government to stand by its earlier commitment to restore parity between Scotland and England, pledging that no firm in Scotland would face higher property rates than those operating in England.
Despite some positive moves in the recent Scottish Budget, such as the freeze in the Basic Property Rate, the overall rates burden remains at a 26-year high, with smaller stores in Scotland missing out on the temporary rates relief available to retailers in Wales and England.
The SRC’s call for a Poundage Rate Lock is timely, as the retail sector faces mounting pressure from both rising operational costs and uncertain consumer spending patterns.
Without a clear resolution to the rates issue, many businesses fear that the competitive disadvantage could deepen further, ultimately harming Scotland’s retail sector.
As discussions continue, it remains to be seen whether the Scottish Government will take action to address the growing concern surrounding business rates.
Until then, Scottish retailers will continue to grapple with an increasingly costly environment for operation.
