One of Scotland’s most important industries is being squeezed to the point of crisis, according to a warning from the accountancy firm Henderson Loggie. The firm’s head of food and drink, Matthew McDermott, says a punishing tax burden and shrinking margins are threatening a sector that contributes more than 19 billion pounds to the economy and ranks among the country’s largest employers.
At the heart of the concern is value added tax. McDermott points out that food and drink businesses here face one of the highest VAT rates in Europe at 20 percent. The contrast with neighbours is stark: the equivalent rate is 9 percent in Ireland, 7 percent in Germany, and 10 percent in France, Italy and Spain. That gap, he argues, leaves Scottish producers and hospitality operators competing on uneven ground.
The pressure does not stop at VAT. Operating profit margins across the sector have thinned to around 3 percent, leaving almost no room to absorb shocks. Rising employment costs, stubborn inflation and high energy prices have all eaten into what little cushion businesses had, while a tangle of tax rules and regulation adds cost and complexity on top.
McDermott is not simply sounding an alarm. He is calling for specific action: a review of employers’ National Insurance contributions, permanent cuts to VAT rather than temporary reprieves, and an overhaul of tax policies he describes as outdated. The theme running through his argument is that short-term fixes are no longer enough for an industry operating this close to the line.
“Now is the time for politicians to shift gear from promises to policy and help an industry that is at the heart of Scotland’s future success,” he said, framing the issue as one of national economic importance rather than a narrow sector complaint.
The stakes are easy to see. Food and drink is woven through Scotland’s identity and its exports, from whisky and salmon to a dense network of smaller producers and hospitality businesses that anchor local economies. When margins fall to 3 percent, even a modest rise in costs or a soft trading month can push a viable business into difficulty.
Whether policymakers respond is another question, and tax decisions of this kind sit with the Treasury as much as with Holyrood. But the warning adds a clear voice to a growing debate about how to keep one of Scotland’s flagship industries competitive, and it puts a number on what is at risk if the pressures are left unaddressed.
