Scottish Budget brings little cheer

End of business rates ‘holiday’ will bring further challenges this year, writes Wylie & Bisset partner Catherine Livingstone

Catherine Livingstone

Finance secretary Kate Forbes’ Budget announcement that the two-year business rates ‘holiday’ given to hospitality businesses due to the pandemic will end at the beginning of the new fiscal year, with hospitality businesses set to receive 50% rates relief for the first three months of the 2022/2023 fiscal year (April to June 2022), capped at a maximum of £27,500 per ratepayer has not exactly cheered the licensed trade.

While Ms Forbes claimed that the measure would ‘prevent a cliff edge for businesses’, many trade groups insist it would do nothing of the sort and that, coupled with Public Health Scotland’s advice to people to postpone Christmas parties in light of the Omicron variant, 2022 looks set to be yet another challenging year for the trade.

Although the extension of business rate relief of 50% from April to June 2022 will delay financial pressure, it does little to eliminate the many challenges faced by the hospitality sector.

Having started 2022 on the back foot after a decidedly unfestive festive
season for many, there are numerous licensees confronting a long and dark
winter ahead. What would make that prospect less gloomy would be the return
of government support targeted at the trade to help those licensees survive
this protracted period of restrictions on their ability to do business.

Given the perfect storm of rising costs, with inflation, supplier price increases and rising debt levels, the removal of rates relief will only add to the litany of financial concerns confronting licensees and will place many businesses at real risk for their survival.

And with employers being encouraged to ask staff to work from home where
possible, many city centre bars and restaurants will continue to suffer a
significant downturn in trade throughout the working week, making robust
cashflow management critical to the survival of many city centre operators.

For operators tackling scarcity of supply, inflationary pressures and staff
shortages this winter, cash is king. That’s because many of them have accrued
significant debts over the last 18 months as they have struggled to keep
their operations afloat, and the culmination of the furlough scheme has
heaped further financial pressure on their ability to service these debts.

So it’s essential that they review cashflow projections, be prudent and identify any issues arising so they have time to approach the bank to arrange an overdraft or determine if they have scope to delay outgoing payments or bring debtors in quicker.

If they prepare cashflow projections on a worst-case scenario and can determine that they can survive, then they will be well prepared and be in a sound financial position when the economic situation transpires not to be as bad as feared.

  • Catherine Livingstone is a partner and head of the business advisory services team at Wylie & Bisset