What does a Labour government mean for Scottish businesses?

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

• 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.