Hikes in business rate are adding extra cost pressures on already strapped Scottish companies, says a new survey.

Since April, many Scottish firms have been coming to terms with hikes in their non-domestic property rates after the first rates revaluation in a number of years. More than 260,00 non-domestic properties have been re-rated, often with eye-watering increases in rates.

Scottish firms have complained that with turnover figures being included in rating, more successful companies who have invested in their properties are being penalised. One Glasgow live-music bar has an increase from £111,000 a year to £645,000.

According to latest quarterly Understanding Business survey, seven in ten businesses (69 per cent), excluding ‘don’t knows’, reporting that they’ve experienced increases in the last 12 months. In the survey of more than 500 Scottish firms, business rate increases were listed as a contributing factor in rising costs, with other causes including workforce costs and the price of utilities and raw materials.

More than half (51 per cent) of affected companies said they have raised prices in response to rising business rates. 

Malcolm Robertson, founding partner at Charlotte Street Partners, joint compilers of the survey, said: “These findings should trouble any politician at Holyrood or Westminster who claims to support economic growth. The business rates regime is little more than a tax on employers of people, of those who work for them and on the things that might give us comfort in difficult times, like going to the pub or out for a meal or on holiday.

 “It is also a tax that is not fit for purpose and endless reviews and tinkering around the edges will not get the economy moving. Business rates and UK-imposed taxes on employers must come down to give businesses the confidence they need to invest and create good, well-paid jobs.”

Scott Edgar, senior research manager at Diffley Partnership, said: “The latest findings point to a mixed picture for Scottish businesses. While many indicators remain relatively stable, more firms expect to raise prices in the months ahead, and concern about business survival has risen to its highest level in over two years.

 “At the same time, confidence that governments are responding to business needs has fallen back. Although a clear majority still see Scotland as a good place to do business, that underlying optimism is starting to come under pressure from persistent cost challenges.”

Other actions firms have taken in response to rising rates include changing strategy (38 per cent), delaying growth plans (27 per cent), dipping into savings or investments (22 per cent), creating new charges (18 per cent), and cutting staff (14 per cent).

In the Scottish Budget, the Scottish government announced that all three bands of business rates – the basic, intermediate and higher property rates – would be cut from 1 April.

Other transitional reliefs have been being brought in to ease the move to the new system, including an extension of the Small Business Bonus Scheme, which allows some firms to get up to 100 per cent tax relief.

Rates relief of up to 40 per cent is available for some retail, hospitality and leisure businesses with properties that have a rateable value of up to £100,000. Hospitality businesses on islands or in specific remote locations can also get 100 per cent rates relief, capped at £110,000 per year.

More broadly, two-in-three firms (65 per cent) expect to increase prices over the next three months, which is the highest level recorded in the survey since June 2023, at the peak of the post-pandemic cost-of-living crisis. 

 These pressures have contributed to wider concerns over business survival, with two-fifths (40 per cent) of businesses saying they are more concerned about survival than they were three months ago – the highest levels since March 2024. Fuel costs have also emerged as a significant concern, with two-thirds (66 per cent) saying they are more worried about fuel prices than three months ago.

 As for alleviating costs, reducing business rates was the second-most cited intervention that respondents said would help business growth. At 32 per cent – the highest level recorded since June 2024 – it ranks second only to reduced taxation overall (40 per cent).

 June’s results point to further erosion of confidence in Scotland’s elected leaders just over one month since the start of the new parliamentary term, which saw an influx of 64 newly elected MSPs and the formation of the new government at Holyrood.

 Only two-in-five (41 per cent) firms believe the Scottish Government is taking action to address Scottish business concerns, a six-point drop from the previous wave (47 per cent). Just over a quarter (28%) of respondents say the same about the UK Government, representing a drop of five percentage points since March (33 per cent). Most businesses (67 per cent) also believe the Scottish Government works more in the interest of big businesses than small firms.

Turnover and profitability also remained largely flat from three months ago, with 40 per cent expecting increases in turnover (+1 from March) and 38 per cent expecting increases in profitability (unchanged from March).

Business leaders still say Scotland remains a good place to run a business, with nearly two-thirds (64 per cent) expressing that sentiment and three-fifths (61 per cent) saying it is a good place to invest.

Understanding Business is designed and conducted by research consultancy Diffley Partnership and strategic communications firm Charlotte Street Partners.