Scotland business

Industry bodies in empty property rates relief call

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Recent changes to rates relief on empty property could be responsible for industrial construction output in Scotland falling to a 28-year low, according to two industry bodies.

Official figures showed output from the sector more than halved in value to £253m in the year to March.

Until April, industrial properties received 100% relief from business rates as long as they were vacant.

That has now been restricted to the first six months a property is vacant.

After that period, landlords receive just 10% relief.

The Scottish Building Federation (SBF) and Scottish Property Federation (SPF) cited the changes as "a potential cause" for the slump in industrial construction output. It was estimated by the Office for National Statistics at just £46m in the first three months of 2016 - its lowest quarterly level since the first quarter of 1987.

The Scottish government said business rates relief for empty industrial property remained "more generous" in Scotland than in the rest of the UK.

'Major impact'

SBF managing director Vaughan Hart said: "While we accept that these figures reflect a period immediately prior to the new rules on rates relief coming into force, they reflect a general decline in confidence within the industrial sector of the industry partly as a consequence of these new rules, which were announced back in December.

"Anticipating the loss of rates relief on industrial property and the associated increase in risk, companies have simply been far less inclined to commit to new work in the industrial sector.

"In this context, the decline we've seen in industrial output during the first three months of 2016 is particularly telling."

He added: "We fully support industry calls to reverse the new policy on rates relief so the industrial property market can recover, generating more new work for our members."

SPF director David Melhuish said: "The recent figures for new construction orders for the industrial sector are a major concern.

"The consequence for the development sector of paying 90% rates soon after a building comes to market is that cash flow is hit, adding substantial risk for the investor and deterring projects or reducing their scale.

"This will reduce the amount of industrial space as older properties are demolished or withdrawn from the market putting more pressure on the space left in use to pay rates and to sustain or grow our business infrastructure."

'Tough decisions'

A Scottish government spokeswoman said: "Business rates relief for empty industrial property remains more generous in Scotland than in the rest of the UK, despite the Scottish government having to take some tough decisions as a result of the UK government's cuts to our budget.

"One of those was to reduce levels of empty property rates relief from 1 April 2016, to generate revenue and incentivise landlords to return empty property to use.

"Following feedback from stakeholders, the initial proposal was moderated.

"We have also committed to review the rates system in Scotland.

"Former RBS Scotland chair Ken Barclay is leading the Scottish government's review of the business rates system to ensure that it minimises barriers to investment, is responsive to economic conditions and supports long-term economic growth and investment."

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