Business leaders in Scotland have warned that the Scottish government's proposed Food Price Cap could leave shoppers paying more for some goods and reduce their choice of essential items. The Federation of Small Businesses (FSB) Scotland and the Scottish Grocers' Federation (SGF) said international evidence suggests price controls often fail to reduce the overall cost of living and can instead lead to both higher prices and reduced consumer choice.
Evidence on Price Controls
Research highlighted by the Scottish Parliament Information Centre (SPICe) found little evidence that price controls deliver lasting reductions in the overall cost of living. The review notes that while some consumers may initially benefit from lower prices on specific products, the pressures placed on suppliers and retailers often lead to adverse results for consumers.
These include less availability of price-controlled items and price rises on other products as businesses look to recover losses. Similar concerns have been raised by economists examining food price interventions in countries such as Hungary.
Impact on Small Retailers
The proposed cap would also place extra pressures on Scotland's community-based retailers, convenience stores, and family-run businesses, who do not have the purchasing power and ability to absorb commercial pressures of their bigger rivals, the organisations said.
SGF chief executive, Dr Pete Cheema OBE, said: "Local retailers often operate on tight margins and rely on a relatively small range of essential grocery products to generate the income needed to keep their businesses viable.
"Many food producers, wholesalers and retailers continue to face significant costs, including energy, transport, employment costs, increased inflation & interest rates and a raft of new product restrictions and regulations.
"These costs do not disappear simply because the Scottish government decides to impose a maximum retail price on certain products.
"Ultimately, consumers could find themselves paying more elsewhere in their weekly shop, undermining the very objective the policy is supposed to achieve. For many small shops, this could be the difference between remaining viable and being forced to close."
Calls for Targeted Support
FSB and SGF argue that ministers should focus on targeted support for less affluent households and on reducing the tax, regulatory, employment, energy and property costs embedded throughout the food supply chain. The consequences of greater pressure on small businesses could extend beyond individual stores, threatening local employment, high street vitality and access to essential goods in rural and remote communities, they added.
Scotland director for the Federation of Small Businesses (FSB) Colin Borland, added: "Everyone wants to see food become more affordable, but putting a legal cap on prices does not make food any cheaper to grow, manufacture, transport or sell.
"The experience from other countries suggests that when governments intervene in prices, the costs often appear elsewhere. Consumers can end up facing higher prices on other products and reduced choice on shop shelves, while local stores who already operate on very tight margins face extra pressures.
"The Scottish government's own assessment acknowledges that smaller retailers could lose business as spending shifts towards larger supermarkets. That should concern anyone who values thriving local high streets and access to shops in rural and island communities.
"The risk is that a policy intended to help household budgets ends up making life harder for independent retailers while failing to tackle the root causes of food inflation."
