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What does a Labour government mean for Scottish businesses?

Mark Brown · Posted on: September 20th 2024 · read

While we continue to adapt to the unfamiliarity of a Labour government, businesses across Scotland are already analysing what that might mean for their sector.

Full details are yet to emerge of the party’s intentions; however, business leaders are keeping a close eye on emerging policies relating to housing investment, employment rights, fiscal changes and the containment of inflation.

Here we look at a selection of sectors and the main aspects of Labour’s plans that could impact the businesses within them.


Oil & gas/energy/renewables sector

  • Labour are working to announce their specific plans regarding their policy and fiscal changes for the sector. What happens here will be crucial for Scotland and the north-east in particular.
  • The possibility of less advantageous Energy Profits Levy (EPL) investment allowances is a significant uncertainty for those involved in setting exploration budgets and for multi-national operators appraising the relative merits of where to invest geographically. Stalled North Sea projects have already been widely announced pending publication of Labour’s policy intentions.
  • The key is to ensure that any fiscal changes do not create a counter-productive flight of transient skilled staff currently employed in the O&G sector when these transferable skills will be absolutely essential in supporting the renewables / decommissioning & carbon capture sectors.
Construction site
Renewable energy

Hospitality and retail sectors

  • These sectors have experienced considerable change since the Covid-19 pandemic. For the hospitality sector, reduced supply coupled with increased demand from local and visiting tourists has generally led to a sustained increase in room rates.
  • For the retail sector, the outcome of the sector is less dependent on government policy. More important is continued containment of the inflation rate allied to a gradual reduction in interest rates that will leave consumers with more spending power.
  • Both sectors are greatly impacted by the department for business & trade implementation of NMW & NLW legislation. It is probable that national minimum / living wage rates will continue to increase ahead of the reduced inflation rate.
  • This, allied to the proposed Employment Rights Bill’s stated objective to “make work pay” will be impactful. The bill will result in a probable ban on zero hour contracts along with extended parental leave and sick leave and enhanced statutory sick pay entitlements. These could significantly add to the cost base of these sectors, which may well be passed on to consumers.

Construction

  • For the domestic construction sector, the key concerns currently are the relative weakness of the north-east housing market (local economic uncertainty and 5% base rate) and the travails of the Scottish planning system.
  • Despite the Scottish Government’s stated intention to improve the planning process, a lack of funding for councils has resulted in under-staffed planning departments with a lack of graduate trainees entering the public sector along with an aging workforce.
  • It is clear that public spending budgets will continue to be insufficient under the new government given that they have stated a reluctance to raise personal taxes. Any increase in fiscal revenue is expected to be generated by growth in the UK economy and a raised tax take from businesses. This will most probably come from capital taxes in tandem with the 25% rate of corporation tax introduced by the previous Conservative government that came into effect on 1 April 2023.


In summary

For the first time in 14 years, we have a change of government. With every election comes economic uncertainty but this is elevated when that involves a change of governing party.

While the details of what the change to Labour will mean for Scottish businesses is yet to fully emerge, we can be sure that each sector will be waiting with bated breath.

Stay updated with MHA

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Stay updated on the latest developments right here on our dedicated Autumn Budget hub.

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