We asked pub operators from around the country what they thought of the Scottish Government’s performance – from Dundee to Edinburgh – here is what they had to say.
Adrain Gomes, 10 Dollar Shake, Aberdeen
How would you rate the Scottish Government’s approach to non-domestic rates (NDR) for hospitality businesses, and the recent re-evaluation… what has/will be the biggest impact – positive or negative – on your operations?
ScotGov’s approach has always been a mystery. Retail and office space can be calculated based on rent or floor space, and hospitality seems to be based on what the Scottish Assessors think the revenue should be (or they compare it to similar-sized venues, without taking the concept or customer demographic into consideration).
If those who have worked in the industry for decades can’t accurately predict the revenue of a venue, how are property surveyors supposed to?
It’s a finger-in-the-air black magic. The biggest impact is the uncertainty – appeals take years, during which time you have to pay the higher rate. It’s bureaucracy at its worst.
How confident are you that the current governing party can create a positive environment for Scotland’s hospitality sector to thrive in the years ahead, and what would increase that confidence?
Part of me genuinely believes there is a segment within the current governing party who are advocates for temperance. They don’t follow suit with the UK government when it comes to rates relief, nor are they pro-actively supporting businesses in general. Look at oil and gas – given that North Sea revenues played a massive part in their independence, they have turned their back on it – and the fact is rural Scotland still runs on fossil fuels. I should know, I have an oil tank and a wood-burner and I couldn’t survive a winter without them.
Do you think the Scottish Government is listening or do you think they are paying lip service until after the election?
It’s election time which means it’s time to roll out the voter bribes. The two parties that will likely form a coalition, should Reform gain a lot of seats, both voted against the Scottish Parliament motion. I think that sums up who’s listening, and who isn’t. What is the most important ask right now? I think the main ask is don’t do to us what you did to the oil and gas industry. Tax revenue is not a never-ending magic pipeline.
Jonathan Macdonald, Scoop Restaurants, Glasgow
How long have you been in the How would you rate the Scottish Government’s approach to nondomestic rates (NDR) for hospitality businesses, and the recent reevaluation… what has/will be the biggest impact – positive or negative – on your operations?
I find the Scottish Government’s approach to hospitality NDR disgusting. This isn’t about party politics – I’m not party political, I have seen the disdain with which hospitality businesses have been treated for years.
All of the support Ivan Mckee lists will barely affect us, even wee Ox and Finch has an RV of £160k, well out with the scope for most of the support. We’re seeing a 73% increase at Ka Pao and 136% increase at Margo & Sebb’s, everywhere we operate we’re the highest in the neighbourhood.
High-turnover, lower margin, food focussed businesses like ours seem to get hit the worst, I’ve seen many examples of national fast food and coffee chains seeing modest increases, whilst independent restaurants that cook fresh food, employ armies of people and add real value to their local area get hammered.
The valuation methodology is broken, none of our RVs are anywhere close to our rents, they say their system is supposed to value market rent, it doesn’t, and that is an easily demonstrable fact.
How confident are you that the current governing party can create a positive environment for Scotland’s hospitality sector to thrive in the years ahead, and what would increase that confidence?
The dismissive and deflecting tone of the Scottish Government is appalling, jobs and peoples hours are being cut right now, businesses will continue to close, this will have a negative impact on the overall tax take and increase unemployment.
What is the most important ask right now?
The most important ask is a fair and transparent non-domestic rates system that accurately reflects market rent, rather than penalising high-turnover, lower-margin, food-focused hospitality businesses. Every operator I speak to has had their profitability squeezed in recent years.
John Black, The Fort Hotel, Broughty Ferry
How would you rate the Scottish Government’s approach to non-domestic rates (NDR) for hospitality businesses, and the recent re-evaluation… what has/will be the biggest impact – positive or negative – on your operations?
The Scottish Government have not yet made it clear on their intentions where we will actually stand when April comes. The impact the increase will have on my business will have major long term damage.
Our business is split over six properties. The increases are as follows: a £72,600 increase, bringing the rate to £147,750; a £2,100 increase, bringing the rate to £4,150; a £1,800 increase, bringing the rate to £3,550; a £1,100 increase, bringing the rate to £2,200; a £1,650 increase, bringing the rate to £3,300; and a £1,500 increase, bringing the rate to £2,950.
The smaller rates are annexes, which make up part of the hotel.
On the back of these proposed increases we have taken the decision to start closing down parts of the Hotel with immediate effect. We have already put two of the apartments on the private rental market and are putting in for change of use on another of the annexes in the hope to turn this into office space.
Over the next 2 years we will look to downsize another 2 annexes and convert into rentals. These rentals, if and when we get them rented out will not be extra income but a portion of the money we need to pay the new proposed rates. Over the next 2 years this will also impact at least 4 Jobs.
The 2 apartments going to the private rental will pay less rates than I’m paying now and the office space will drop below the value where they actually pay no rates, so in turn every time we decrease what we do the government will actually be getting less. This latest stunt will have more impact on our trade than COVID. We are still a busy business and employ over 60 staff but we can not sustain these increases year on year.
How confident are you that the current governing party can create a positive environment for Scotland’s hospitality sector to thrive in the years ahead, and what would increase that confidence?
We have all talked about action over the years but it’s mainly been talk and not enough action. If our trade is to survive we really need to see change.
Do you think the Scottish Government is listening or do you think they are paying lip service until after the election?
If we personally go to the press the public turns against us, but do people really realise how big a part of what we do helps the economy to survive. We are a trade, we are real people and not just simply a taxing tool!
What is the most important ask right now?
The most important ask right now is – Scrap the new rates, bring our rates into line with other businesses and stop the rateable value going on turnover, turnover is not profit! Reduce the VAT to 10% and have all businesses pay VAT. Scrap the living wage and have minimum and skilled wages. Reduce the NI they hammered us with last year. If they don’t start to change, the hole they have put us in is only going to get bigger. Do they work for us or do we work for them?
– The Oak Tree Inn, Balmaha
How would you rate the Scottish Government’s approach to NDR for hospitality businesses, and the recent revaluation? What has been the biggest impact on your operations?
The current approach to Non Domestic Rates is fundamentally disconnected from the operational reality of hospitality in Scotland. The revaluation has hit established, higher rateable value businesses particularly hard. Businesses like ours at The Oak Tree Inn in Balmaha have invested heavily over a 30 year period to build something sustainable and significant. That success now appears to count against us.
Because we have a higher rateable value, we fall outside most relief schemes. We are effectively penalised for having grown. In our case we are facing an increase approaching 79 percent. That level of uplift bears no relationship to profitability.
Turnover growth is not profit growth. Rising revenue is being entirely consumed by wage inflation, food cost increases, energy volatility, regulatory pressure and now a year round visitor levy.
The biggest impact is not simply financial. It is the collapse of confidence. We are currently mothballing multiple development projects because the risk profile no longer makes sense. We have shifted from expansion and job creation into survival mode.
As directors, we have not taken additional remuneration in over a decade because the business cannot sustain it. At the same time, our management team and even new starters now effectively earn more than we do once all obligations are met. That is not a complaint about paying staff fairly. It illustrates how distorted the cost base has become. When long term owner operators are effectively absorbing the strain personally while fixed government costs continue to rise unchecked, it is no surprise that businesses are folding at the rate we are now seeing across Scotland.
How confident are you that the current governing party can create a positive environment for Scotland’s hospitality sector to thrive in the years ahead? What would increase that confidence?
At present, confidence is extremely low. Hospitality does not feel like a strategic growth sector. It feels like a revenue stream. Businesses of our size are too large to qualify for meaningful relief yet too small to absorb repeated structural cost shocks. We are consistently excluded from support while carrying increasing tax burdens.
Confidence would improve immediately if we saw:
- An immediate pause on rates increases similar to Northern Ireland
- Transitional caps on extreme revaluation jumps
- A meaningful review of NDR that reflects margins rather than rateable value alone
- An immediate VAT reduction for hospitality
- A proper cumulative impact assessment of rates, wage policy, energy costs and the visitor levy
An immediate VAT reduction and a pause on rates would send a clear signal that government understands the urgency. Without that, investment will remain stalled.
Do you think the Scottish Government is listening, or paying lip service until after the election?
At this stage, it is difficult to argue that government is genuinely listening.There have been consultations, industry meetings and submissions. However, when policy outcomes repeatedly move in the opposite direction of overwhelming sector feedback, the only reasonable conclusion is that those views are not influencing decisions.
On the visitor levy, for example, strong and consistent opposition was expressed by many operators, particularly to a year round model. It proceeded regardless. The perception across the industry is no longer that government is weighing up feedback. The perception is that decisions are being made and consultation is taking place afterwards to legitimise them.
That is deeply damaging to trust. Businesses need to see policy adjusted in response to evidence. At present, we are not seeing that happen.
What is the most important ask right now? The most important ask is immediate intervention to restore stability and confidence.
Specifically:
- An immediate pause on Non Domestic Rates increases
- Transitional protection for extreme uplifts
- An immediate VAT reduction for hospitality
- A full review of cumulative cost burdens
We currently have multiple projects ready that would create jobs and enhance our local economy around Loch Lomond. They are mothballed. Not because demand is absent, but because policy risk and fixed cost escalation make forward planning irresponsible. Right now, hospitality businesses are not looking to grow. They are trying to survive. If government wants confidence, it must demonstrate that it is prepared to change course. Until then, the sector will remain cautious and defensive.
Sandy Fraser, father, and founder of the Oak Tree Inn, also had this to say:
“No sensible government would choose to implement, on many tourism businesses, over a 100% plus increase in any other form of tax and expect them to survive. Please do not naively think that they do not have control over the NDR rating system.
“The fact that ministers in the Scottish Parliament appear to think that, because Edinburgh is constantly over-busy with tourism, the same logic should be applied across Scotland is complete madness. “There is virtually no business support for higher rateable value hospitality businesses, which now means all projects cancelled and a move to survival mode. I can categorically say I regret persuading my children to make a future in the hospitality/tourism sector.
“I am very aware that it is generally accepted that the Non-Domestic Rates system is not fit for purpose, and the promise of a review and, sadly, some positive action will be too late to save an industry once the envy of the world.
“I fear that there are so many other issues going on in the Scottish Government that we just are not important enough, and they see it as an easy revenue earner. I really wish we were a bit more like the farmers, who without doubt have improved their position with their recent on-going actions. The visitor levy is a good example. We talked to umpteen businesses, and we did not find one that supported the proposal in the Stirling area, and yet Stirling Council claimed the proposals were supported by many businesses.
“The damage is already done, with pubs closing on a daily basis, hotels only managing part opening, and eventually closing. You would really think that the hospitality tourism sector, being of such importance to Scotland, would merit a Minister specifically.”
Scottish Hospitality Group launches campaign to STOP hospitality rates hike