It has taken Scotland’s business community time to properly digest the true costs of Rachel Reeves’ Budget. It now boded for a rather bleak Christmas while companies and third sector organisations await the Scottish budget of Shona Robison on 13 January.

While the botched leak by the Office of Budget Responsibility (OBR) of the Chancellor’s announcement made embarrassing headlines, it showed improved GDP growth predictions for 2026 which has given the Chancellor some headroom for manoeuvre on her mission to reform the welfare system.

Yet, too many of Reeves’ announcement had already been leaked or trailed in the media, with the RBS’ Chief Economist describing the whole Budget as a “bit of a damp squib”. There is no getting away from the massive tax burden being placed on ‘the broadest shoulders’ in the UK, with the burden a 38 per cent of GDP over the next five years, while public spending on the National Health Service, welfare and social security, and defence of the realm, will reach a record 44 per cent of GDP.

 Last week’s Sunday Times revealed that Reeves was going to end the two-child cap rule, which will cost £3bn, along with a raft of other announcements including rail fares being frozen, and increase in costs for electric vehicles, with a new charge of 3p per mile imposed from April 2028.  This will cost drivers an extra £210 a year for an average 7,000 miles per year. The Sugar Tax on soft drinks, including milkshakes and canned lattes, was already well trailed with the likes of Irn-Bru maker AG Barr evaluating how it might change some beverage recipes.

The decision to keep the Energy Profits Levy (EPL) on the North Sea was viewed as a blow to those business voices seeking help in moving towards a green transition. This 78 per cent levy on North Sea energy production will stay in place until 2030.

Russell Borthwick, chief executive of Aberdeen and Grampian Chamber of Commerce said: “Without so much as a mention, the UK Government has opted for a cliff-edge end to North Sea production and to tax the industry to death inside five years. Jobs will be lost in their thousands as a direct result of this government’s failure to act.”

Few will have missed the announcement across the North Sea, where Equinor, the Norwegian energy giant, has said it will be increasing its oil and gas activity in the North Sea basin, so that it can set aside more money for a steady transition to the likes of carbon capture technology which is taking much longer than anticipated to become commercially viable.

Offshore Energies UK have urged the Chancellor to reconsider, pointing out that 1,000 jobs will continue to be lost every month because of the levy, and at a time when the security of gas supply is a matter of national importance.

Mike Tholen, director of policy and sustainability at Offshore Energies UK, said: “The UK has the resources to boost North Sea  gas production and help meet peaks in energy demand, yet the continued taxing of non-existing windfall profits has become a major deterrent to North Sea investment.”

One Scottish news highlight was the additional £820 million that Holyrood will receive for the Barnett consequential formula. How Ms Robison chooses to spend this will be announced in the New Year.

It is not only the oil and gas industry which is smarting, Scotland’s hospitality sector, including the whisky industry, the commercial property operators, and others, do not see the Budget as a ‘damp squib’, rather more several nasty bangers being thrown in the face. This, at a time, when employers are now dealing with the consequences of the previous Budget’s increases in employeers’ National Insurance. If the Chancellor wanted to encourage more people to come off benefits and into the workplace, and there is record number of 18-21 NEETs, not in employment, education or training, then business leaders feel the Labour Government is still not listening.

UK productivity figures still lag behind many other OECD countries, and the Chancellor made several big ticket announcements on national infrastructure to stimulate productivity including the go-ahead for the Lower Thames Crossing, Northern Powerhouse rail projects, and small-scale nuclear reactors in Angelessy. In Scotland, there is a £20m investment in Inchgreen drydock on the Clyde, the £20m improvement of Kirkcaldy waterfront, and £14m for Grangemouth’s transition project to low-carbon technologies.

However, this did not amount to a ‘National Strategy for Growth’, more a piecemeal payout for favoured projects in areas where Labour seats were under most threat from a surge by Reform.

From a hospitality point of view, life is looking bleak. Marc Crothall, chief executive of the Scottish Tourism Alliance, described the Budget as a ‘major setback’ when businesses were at breaking point. He said the sector needed a budget that would reduce the costs of employment and strengthen consumer confidence. He spoke later about Scotland need to maintain its quality standard in the international hospitality market because many other countries were offering vacations and breaks that were substantial cheaper than a visit to Scotland.

David Lonsdale, director of the Scottish Retail Consortium, said that while the Chancellor announced a permanent reduction in the non-domestic rate bills for hospitality and leisure businesses, paid for by a surcharge on the very largest online delivery companies through a warehouse tax, the reality is that every shop with a rateable valued over £500,000 would see a business rate rise. A consequence of the warehouse tax is that Glasgow and Edinburgh airport face massive extra costs for their hangar areas and the associated repair sheds. The onus will be on the Scottish finance minister to make the most of this by reducing non-domestic task rates on all retailers and other businesses in her January budget.

Scotland’s battered whisky industry remains shocked by a tax rise linked to the Retail Price Index, which comes after a 3.65 per cent rise in spirit duty last year, and a 10 per cent hike by the Conservatives in August 2023. Mark Kent, chief executive of the Scottish Whisky Association, said: “The industry is disappointed that the domestic tax burden has once again increased, putting huge additional pressure on a sector suffering job losses, stalled investment and business closures.”

He said the previous 3.65 per cent increase meant a drop in revenues to the Treasury of £150 million, and he told politicians that the vital drinks industry does want a tax cut, or a handout but “simple breathing room” for a critical Scottish industry.

Colin Wilkinson, of the Scottish Licensed Trade Association, representing pubs, bars and hotels, said there was nothing in the Budget to mitigate increasing costs. “The National Living Wage has also increased again [from £12.21 to £12.71 per hour for over-21s] so that means additional costs for employers in terms of both wages and employers contributions.”

The Chancellor’s freezing of personal tax allowances for a further three years from 2028, will see many more people in lower income jobs, in the likes of the hospitality and hotel sector, paying tax for the first time. The minimum wage for 18 to 20 years olds will increase 8.5 per cent to £10.85 per hour.

But what the Chancellor gives with one hand, is being taken away with another. Adrian Pabst of the National Institute of Economic and Social Research (NIESR) says the Chancellor’s decision to extend the freeze – the biggest tax rise in the Budget – will hit the bottom 30 per cent of UK households hardest.

The Chancellor placed a freeze on rail fares in England and Wales, yet much more money is required to upgrade the UK’s railway system. We will need to wait until the Scottish budget in January to see if Transport Scotland can do the same on fares.

Sandy Bebgie, the chief executive, of Scottish Financial Enterprise, said the Budget was a “smorgasboard of tax rises with no serious attempt at public sector reform, and no discernible strategy to raise long-term growth.”

On Venture Capital Trusts, which have been important for investment in Scottish investors. Alex Davies, the CEO of Wealth Club, said: “The decision to cut VCT relief from 30 per cent to 20 per cent has sparked a Black Friday rush for the top VCT managers.” His company was seeing a 538 per rise in applications after the Budget.

VCT have limited capacity and often sell out fast. With investors keen to lock in 30 per cent income tax relief before next year this was a critical time to buy, with VCTs such as Baronsmead VCT, and British Smaller Companies VCT open for investors.

One ray of light was the widening of the enterprise investment scheme, with a three year stamp duty exemption for the listing of new UK companies. This is to encourage more companies to press from an IPO (an initial public offering)

David Ovens, joint managing director of Archangels in Edinburgh, said: “The decision to widen eligibility for, and extend, enterprise incentive schemes is a clear demonstration of support for the role which founders and investors ply in economic growth.”

 As Jeremy Warner said in The Telegraph. “If you are in business, are a middle-income earner, aspire to self-improvement or have work hard to rise up the property ladder, there is virtually nothing for you in this sticking plaster approach to the nation’s myriad fiscal and economic challenges.”

We can all look forward to more harsh medicine on 13 January.