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Retail bosses demand SNP action on tax and spending cuts ahead of budget

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  Published in Business and Finance on Monday, September 1st 2025 at 2:18 GMT by The Scotsman

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Retail leaders press SNP to step up, ahead of UK budget announcement

In the run‑up to the United Kingdom’s summer budget, Scottish retail executives are sounding a warning bell. Across the country, shop owners, retailers and the industry’s umbrella bodies have joined forces to urge the Scottish National Party (SNP) to intervene before any tax or spending cuts that could dent the sector are finalised. The calls come at a time when the retail sector, which accounts for roughly 8 % of Scotland’s gross domestic product and employs nearly 140 000 people, faces a double‑whammy: the fiscal tightening of the UK government and a possible re‑allocation of Scottish budgets that could raise corporate taxes, council tax and the VAT on “non‑essential” goods.

The Scottish Retailers Association (SRA) has been at the forefront of the lobbying effort. In a statement released yesterday, SRA chief executive Sir Paul McGovern said: “We are at a tipping point. Our shops, especially the independent ones, cannot absorb a hike in corporate tax or a rise in VAT without risking the livelihoods of hundreds of families.” He added that the SRA had already drafted a set of proposals that the SNP should adopt before the budget is released.

What the retailers want

The demands are clear and focused on three pillars: tax relief, support for small shops, and a guarantee that the retail sector will not bear the brunt of spending cuts.

1. Corporate tax – Retailers argue that the UK government’s planned increase in corporation tax to 22 % in the next financial year will push profits out of the hands of local businesses and into the pockets of the state. The SRA is pressing the SNP to keep corporate tax rates at their current 19 % level for the retail sector or to at least negotiate a more favourable reduction schedule.

2. VAT – While Scotland has a lower standard VAT rate (5 %) than the rest of the UK (20 %), the sector is concerned that any increase in this rate would hit consumers hard and subsequently reduce footfall. The SRA is asking the SNP to lobby for the maintenance of the 5 % VAT on food, clothing and household items, citing a 30 % drop in sales when the rate was raised last decade.

3. Council tax and business rates – Many retailers are operating in the same premises as their landlords, making the impact of council tax cuts or business rate adjustments far from straightforward. The SRA wants the SNP to guarantee that council tax will be frozen for the next three years and that business rates will be capped for small premises, ensuring shops can keep their rents at sustainable levels.

4. Investment in digital infrastructure – Retailers also highlighted the need for a £50 m fund that would help smaller shops upgrade to e‑commerce platforms and improve online delivery capabilities. The SRA claims that investment in digital tools is the only way for independent stores to compete with the likes of Amazon and Tesco.

Who is making the calls

The push is led by a coalition of groups: the Scottish Retailers Association, the Association of Independent Retailers (AIR), and the retail arm of the Confederation of British Industry (CBI) Scotland. Sir Paul McGovern and Air Chief Executive Emily Fraser appear to have a meeting in Edinburgh tomorrow with the SNP’s finance team to discuss the budget and the retail sector’s concerns.

The SRA’s statement quoted Fraser, who said: “The retail sector is a cornerstone of our communities. If the SNP is truly committed to Scotland’s future, it needs to protect this pillar, especially when the UK government is tightening its purse strings.” She also added that the sector is already feeling the pressure from a projected 1 % cut in council tax, which would reduce the amount of public spending that benefits retail indirectly through public transport and safety.

Political context

The SNP is the dominant political force in Scotland, with control of the Scottish Parliament and the Scottish Government’s budget. However, the UK government still has a say in national taxes such as corporation tax and VAT. The upcoming UK budget, expected in the next week, is likely to see the Treasury raise taxes to close the national deficit, while the Scottish Government will need to decide whether to offset those rises with targeted spending.

The SNP’s finance team has indicated that they are taking retail concerns into account. A spokesperson for the party said: “We recognise the pivotal role that the retail sector plays in Scotland’s economy. We are working to craft a budget that balances fiscal responsibility with support for the businesses that keep our streets alive.” The SNP has also promised to keep a “no‑cut policy” for local council tax over the next two years, but has not made any definitive statements on corporate tax or business rates.

What’s next

The retail bosses are now calling for a “retail summit” to be held before the budget’s final draft is published. The goal is to present a consolidated plan that the SNP can adopt. If the summit fails to secure a commitment, the sector may look to the UK government’s policy arena, lobbying for a “Scottish retail safeguard” that would set a cap on the tax rates applicable to Scottish retailers.

The final word on the budget will be released in the next week, and the retail sector will watch closely. Their demands reflect a broader anxiety across the country – that the fiscal tightening of the last decade will again erode the economic foundations of small communities. The next few days could therefore be decisive for Scottish retail, and the way the SNP navigates the cross‑border tax issues will set the tone for the sector’s resilience for years to come.