Home Business Scottish firms react with alarm as inflation rate soar to 2.7%
Scottish firms react with alarm as inflation rate soar to 2.7%

Scottish firms react with alarm as inflation rate soar to 2.7%


Firms struggling with rising costs have reacted with alarm after the inflation rate soared unexpectedly to 2.7%.

If this holds until next month, when the CPI figure is used to calculate the business poundage rate for next year, it would add £80 million to business rates bills. Scottish retailers could face an extra £18 million on their annual bill from April 2019.

Scottish businesses still have to pay a higher large Business Supplement in Scotland and all ratepayers who operate out of town face the prospect of a new rates surcharge under ministerial plans.

SRC Director, David Lonsdale, said;

“Retailers are already facing stiff headwinds from rising costs and cash-strapped consumers. With stores under enormous pressure, and sadly closures becoming a feature in many places, it’s ridiculous to consider further increasing the property taxes paid by businesses often operating on a knife edge.

“Whilst there may be a superficial appeal to squeezing the last penny out of stretched businesses, doing so puts stores at risk, threatening jobs and future tax revenues.

“The SRC are calling for a freeze on the poundage in this year’s Scottish Budget. This isn’t about paying less, it is simply not reasonable to continue hiking up bills on struggling businesses. With the retail industry, and indeed the Scottish economy, going through a period of immense change under enormous pressure, this is the time to focus on growth not on further tax rises.”

Economists had expected a Consumer Prices Index rate of 2.4%. The pound rose after the data was released by the Office for National Statistics.

Wages are still rising more than inflation, with data last week showing wages, excluding bonuses, grew by 2.9% in the three months to July.

Suren Thiru, head of economics at the British Chambers of Commerce (BCC), said: “Inflation surprisingly rose for the second successive month in August, largely wiping out the recent recovery in real wage growth and emphasising the continued squeeze on consumers.

“The strong growth in producer prices indicates that inflationary pressures further down the supply chain remain significant and could lift inflation higher in the coming months. However, the upward pressure on prices remains transitory, and inflation should resume its ease back towards target once the impact of the recent increase in oil prices drops out of the calculation.

“The possibility of a disorderly Brexit is the key risk to the UK’s outlook for inflation as it could result in a substantial decline in sterling, which could significantly increase inflation and exacerbate the financial squeeze on consumers and businesses.

“With UK economic conditions subdued, and little evidence that higher inflation is translating into materially stronger pay growth, the MPC has sufficient scope to opt for a prolonged period of monetary stability.

“Against a backdrop of significant political and economic uncertainty, more needs to be done to boost UK growth and productivity, including kickstarting business investment, through tackling the high upfront cost of doing business in the UK.”

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