Rates relief removal takes its toll on Scottish industrial construction sector

Vaughan Hart
Vaughan Hart

Industry bodies have blamed rates relief changes for a 28 year low slump in Scottish industrial construction output.

Output figures for the Scottish construction industry for the first quarter of 2016, published by the Office for National Statistics on Friday, found that activity in the industrial sector fell to its lowest level since 1988 over the 12 months to March 2016.

Over that period, the total output value of this sector of the industry was £253 million, down from £543m during the previous year. At just £46m, quarterly private industrial output during the first three months of 2016 was at its lowest level since the first quarter of 1987.

Now the Scottish Building Federation and the Scottish Property Federation have joined together to highlight the impact of changes to empty property rates relief for industrial property, which came into force on 1st April 2016, as a potential cause of the slump in output.

Whereas empty industrial properties previously received 100 per cent relief from business rates as long as they were vacant, this will now only apply for the first six months that a property is vacant. After this period, empty industrial properties will receive just 10 per cent relief from business rates.

Commenting on the new figures, Scottish Building Federation managing director, Vaughan Hart, said: “We’ve raised concerns for some time about an over-reliance by the Scottish construction industry on major infrastructure projects as the leading source of new work and output.

“These new figures suggest changes to rates relief are having a major impact on output from the private industrial sector of the industry which will only further exacerbate this problem. 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.”

David Melhuish
David Melhuish

David Melhuish, director of the Scottish Property Federation, added: “The recent figures for new construction orders for the industrial sector are a major concern. The consequence for the development sector of paying 90 per cent 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“This will reduce the amount of industrial space as older properties are demolished or withdrawn from the market putting more pressure on the space left in use to pay rates and to sustain or grow our business infrastructure.”

Share icon
Share this article: