Press & Policy

High streets are heart of local economies across Scotland: supporting jobs, attracting visitors, and providing vital services to communities. But the latest Scottish Chambers of Commerce QEI shows that many retailers continue to operate under significant pressure.

Labour costs remained one of the biggest concerns, cited by 73% of retail businesses. While this has eased from the historic high recorded last quarter, it remains a major constraint.

Fuel costs were also reported by 73% of retailers – the highest level recorded in the past five years – while 67% cited energy bills, their highest reading in almost two years.

A difficult environment for consumers is compounding these pressures. PwC’s Spring 2026 Consumer Sentiment Survey found nine out of ten consumers identified the cost of living as their top concern, while eight in ten said they planned to reduce spending over the next three months.

For retail businesses, that creates a squeeze in both directions: operating costs remain high while consumers are more cautious about how and where they spend.

The impact is visible across our survey.

Investment remained firmly negative and has now been in decline since early 2024. When more of a businesses’ resources are tied up covering day-to-day operating costs, there is inevitably less capacity to invest in premises, technology, staff or future growth.

There were some signs of improvement. Profitability and cashflow both strengthened compared with the previous quarter. But both remained in negative territory overall, underlining the continued financial strain across the sector.

Retailers are also contending with wider changes in how and where people shop. Savills has recently reported that UK high street foot traffic decreased by 2.5 percent year over year in Q2 2026, highlighting the ongoing challenges facing physical retail destinations.

A rural retailer responding to our survey described their footfall challenges:

“Footfall is down due to ferry being off for weeks. American visitors seem to be the only ones spending substantial amounts. Accommodation costs are too high and people not staying long enough to explore the more out of the way places.”

For businesses in rural and island communities in particular, transport connectivity, tourism and retail performance are closely intertwined. But the wider point applies across Scotland: when footfall falls and operating costs remain elevated, the ability of businesses to invest and grow becomes much harder.

Another retailer told us that “more help needs to be given to high street retail businesses”, arguing that competition from international online marketplaces meant “it’s not a level playing field”.

That is why SCC is backing reform of Fresh Start Relief.

Under the current system, a property must generally have been empty for at least six months before a new occupier can qualify for relief. SCC believes that requirement should be removed, allowing eligible vacant retail and hospitality premises to benefit from 12 months of relief immediately when brought back into use.

It is a practical reform that could reduce the cost of taking on an empty property, encourage new businesses onto our high streets and help bring vacant premises back into productive use.

There is no single answer to the challenges facing Scotland’s retail sector. But the latest QEI is another reminder that businesses are still being asked to absorb substantial cost pressures while operating in a weak consumer environment.

If Scotland wants stronger high streets and more vibrant town centres, reducing the barriers to investment and bringing empty commercial space back into use is a sensible place to start.