Drop in private businesses ‘spells trouble’ for Scotland

A 2.5% drop in the number of private firms in Scotland “spells trouble” for both the economy and local communities, ministers have been warned.

Official figures showed that as of March 2018 there were an estimated 345,915 such businesses operating in Scotland – a drop of 8,830 (2.5%) on the previous year.

The number of unregistered firms – which have a turnover below the VAT threshold of £85,000 a year – fell by almost 5%, with 8,720 fewer businesses operating in 2018.

However, the number of businesses that are registered for both VAT and PAYE also decreased in the last 12 months, dropping by 105 to stand at 176,295.

That marked the first reduction in the number of private registered businesses since 2011, Scottish Government figures showed.

Almost all of the 345,915 private firms operating in Scotland were classed as small businesses, having up to 49 employees – with 98.2% of companies coming into this category.

Meanwhile, there were 3,925 medium-sized firms, employing between 50 and 249 people, and 2,380 large companies, with a workforce of 250 or more.

Small and medium-sized firms provided an estimated 1.2 million jobs across Scotland, according to the report, with the Federation of Small Businesses (FSB) describing these companies as a vital part of the “fabric of Scotland”.

To help these companies, the FSB called for a business regime that “recognises the difference between multinationals and family firms” but also said there should be a Brexit deal which benefits small companies.

FSB Scotland policy chair Andrew MacRae warned: “A decline in the number of Scottish businesses spells trouble for our ambitions for our economy and our local communities.”

He added: “To tackle this problem, we need to see more people in Scotland choose to start up in business and develop a business environment which helps local firms thrive.

“In the short term, we need to see a Brexit deal which works for smaller firms, not just key sectoral interests, and a Scottish budget which puts enterprise at its heart.

“In the long term, we need a stronger start-up culture, as well as tax and regulatory systems which recognise the difference between multinationals and family firms.”

He stated: “These figures also underline just how important smaller businesses to the fabric of Scotland.

“There are roughly three times as many Scots employed by these operators than work in the NHS and our local authorities combined. By giving smaller businesses the best chance to succeed, we can boost prospects for the country as a whole.”

A Scottish Government spokeman said ministers were “committed to helping businesses start up and grow”.

He stated: “Recent figures show the small business bonus scheme (SBBS) provided £254 million in rates relief to over 119,000 businesses in 2018-19 – a 65% increase since 2008-09 with around 104,000 properties being in receipt of 100% SBBS over the period.

“We accepted the recommendation of the Barclay Review to evaluate the small business bonus scheme and will announce the details in due course. Any findings will be addressed in time for the 2022 revaluation.”

Tory finance spokesman Murdo Fraser blamed the fall in private firms on the SNP’s “anti-business attitude”.

He said: “Over the years we’ve heard plenty of warm words from the SNP about encouraging entrepreneurship and supporting those who set up their own businesses. But those words have come to nothing and these figures today show the situation is now going backwards.

“This is all the consequence of an SNP government with an anti-business attitude.

“Instead of helping people who want to take risks and go it alone with their business, the nationalists focus on hiking tax and punishing hard work. It’s no wonder the number of private business has fallen as a result.”

Labour finance spokesman James Kelly said: “The SNP is presiding over an exodus of small businesses from Scotland.”

Liberal Democrat leader Willie Rennie said: “Businesses can only grow and flourish if they can find the right talent. The Scottish Government needs to build a high-skill, high-wage economy by investing in people, transforming our education and skills system and making a stepchange in mental health.”