Written evidence submitted by Scottish Grocers' Federation (CTS0004)
Dear Public Accounts Committee,
The Scottish Grocers’ Federation (SGF) is the leading trade association for the Scottish Convenience store sector. There are 5,220 convenience stores in Scotland, which includes all the major symbol groups, co-ops, and convenience multiples in Scotland (Scottish Local Shop Report 2024 - https://www.sgfscot.co.uk/publications/sgf-scottish-local-shop-report-2024)
SGF promotes responsible community retailing and works with key stakeholders to encourage a greater understanding of the contribution convenience retailers make to Scotland’s communities. In total, convenience stores provide over 55,000 jobs in Scotland (SLSR 2024).
Modern convenience stores are community assets and now more than ever have an increasingly important role in their local communities. As local economic multipliers, they are important employers of local staff, with that money often put back into the local community and helping to strengthen local economies. Many convenience stores are the “glue” in social and economic community building.
The convenience sector makes important tax contributions to the UK economy. Our retailers are responsible and take proactive steps to ensure they comply with their obligations as taxpayers. Over the last year, the convenience sector contributed over 10.8bn in GVA and over 9.4bn in taxes in the UK (SLSR 2024).
SGF supports an improved tax system that is more resilient and effective for taxpayers, and we recognise the opportunities that modern technology present for improving these systems. We also understand the importance of HMRC’s efforts to reduce tax evasion. Unscrupulous actors who regularly evade tax create an uneven playing field in the business environment and it is the smaller retailers who diligently pay their taxes who lose out here.
However, SGF is also concerned about the high volume of taxes currently placed on our sector currently and would support a more simplified system for paying taxes. Taxation on business is stifling investment, adding to inflation and costs are ultimately passed on to customers, who already pay 20% VAT on purchases.
National insurance Increases
SGF disagrees with the Chancellors decision to increase National Insurance employee contributions from 13.8% to 15% and change the threshold at which employers must start paying the contributions being lowered from £9,100 to £5,000.
Over the last year convenience stores across the UK paid £221m in employer National Insurance contributions (SLSR 2024). While SGF acknowledges the essential role of taxation in funding public services, it is important for policymakers to recognise that tax rises on business often hit smallest organisations the hardest. Our retailers are already facing significant challenges due to the existing array of regulations and taxes. Increased employment costs for retailers could result in higher costs, job losses, increased prices and this will impact on the viability of many of the businesses we represent. Consequently, there is a risk that the intended revenue increase from the employee National Insurance rise may have the opposite effect, as a reduced number of businesses would remain to contribute to the tax base.
On top of the National Insurance increase for employers, the National Living Wage (NLW) will be increasing to £12.21 which impacts retailers’ ability to employ staff. Retailers are paying £5.01 per hour more for the NLW now, when compared to 2016. SGF’s True Cost of Employment paper highlights the true cost of employment for a retailer when including statutory costs such as National Insurance contributions, holiday pay, and additional expenses like uniforms and administrative overheads. Our 2024 publication highlighted that while the NLW was £11.44, the true cost for retailers was approximately £15.39. SGF have repeatedly called on the Low Pay Commission to acknowledge these additional costs for retailers when making decisions on the NLW.
Non-domestic Rates
Over the last year, the convenience sector contributed £199m to the UK Treasury. On Non-Domestic Rates, the UK Government announced 40% rates relief will be passed on to UK businesses in the Autumn Budget. SGF was disappointed when the Scottish Finance Secretary failed to pass on 40% reliefs on to retail in the Scottish budget. SGF is pleased that the Scottish Government continues to offer the Small Business Bonus Scheme, which provides many of our stores with some reliefs. However, we view the Scottish retailers as being at a competitive disadvantage to their English and Welsh counterparts.
SGF believes Barnett Formula consequentials allocated to Scotland should be passed on to support the same sectors that it was intended to. The UK Autumn Budget in October 2024 allocated an additional £3.4 billion to Scotland in 2025-2026 which should have incentivised the Scottish Government to pass business rates relief on to Scotland. SGF advocates for a greater share of these consequentials to be directed towards investing in small businesses, which are facing economic headwinds.
On top of this, a recent report published by the Fair Work Convention (report) called for eligibility for NDR reliefs to be made contingent on payment of the Real Living Wage. Linked to proposals set out in the Fair Work Nation action plan (action plan), published by the Scottish Government in December 2022. Any such course of action could mean that many stores would no longer be viable in the coming years. Therefore, we welcome the Scottish Government’s decision not to implement this proposal.
Corporation tax
The convenience Sector in the UK also makes a substantial contribution in corporation tax. Over the last year the figure was at £335m. However, the volume of taxes impacting the convenience sector is harming the viability of stores across Scotland. Consideration should be given to reducing Corporation Tax to 15%, as it is essential that businesses can reinvest most profits to help future proof their operations against a backdrop of a volatile economy.
Conclusion
A strong Scottish convenience sector benefits the entire country and local people greatly value their local store. Being rated in the top three most wanted services within the community area (SLSR 2024). The sector is more relevant than ever to every type of customer and has key social benefits and is of key economic value to the economy.
Convenience stores also provide essential lifeline services for their communities, such as Post Office facilities (25%), bill payment services (82%) and free access to cash (46%) (SLSR 2025). Nonetheless, while these vital local services are important for the wellbeing of local people, they unfortunately do not always deliver a meaningful financial return. That is why our members pride themselves on being able to deliver a ‘full basket’ basket of goods and services for their customers. However, stores must remain financially viable in order to continue to operate as successful businesses and protect the services on offer and this should be a key factor in the decision making of policy regarding taxation and regulation in the UK.
The cost of doing business and high taxation is harming retailers’ ability to trade, potentially undermining the important role they play in society. Retailers are eager to invest in their stores but there is often little headroom to do so. To ensure its survival and growth, a fair and efficient tax system is essential—one that supports the sector’s vital role in the economy and local communities.
SGF Welcomes the opportunity to respond to the request for further information and hopes the Public Accounts Committee will find the information provided in this response useful.
February 2025