Scotland's 32 councils could be cut, merged, or fundamentally reorganised under proposals being considered by the Scottish Government, in what would be the biggest shake-up of local government since the current system was established in 1996. Council leaders across the country are, to put it politely, wary. Several have pushed back hard, and the political mood among local politicians ranges from cautious to openly resistant. But the review is moving, and SMEs who depend on council relationships for contracts, planning consent, or rate relief need to be paying attention now, not when the consultation closes.
The review stems from the work of the Verity House Agreement, the joint programme between the Scottish Government and COSLA, the body representing Scottish local authorities. The agreement acknowledged that the current structure of local government is creaking, with councils of wildly different sizes, budgets, and capacity trying to deliver the same statutory services. According to COSLA's own analysis, the funding gap facing Scottish councils has widened sharply since 2010, and smaller councils in particular are struggling to maintain service levels without cross-subsidisation from larger neighbours. Reorganisation, in theory, offers economies of scale. In practice, it creates enormous short-term disruption.
For Scottish SMEs, the practical concerns are specific. Procurement relationships are built over years. If your business supplies a council, you know the portal, the contacts, and the tender cycles. A merger scrambles all of that. Planning permission processes, already slow in many areas, could face months of paralysis during any transition as departments are restructured and staff reassigned. Business rates, administered locally, could shift as rateable values and relief schemes are recalibrated under new administrative boundaries. The Federation of Small Businesses Scotland has previously flagged that administrative uncertainty at council level has a direct and measurable impact on SME investment decisions, particularly in construction, professional services, and public-sector supply chains.
Edinburgh sits in an interesting position here. The City of Edinburgh Council is one of the largest and most financially stable in Scotland, and is unlikely to face merger pressure in the way that smaller rural councils might. But boundary changes to neighbouring councils in the Lothians could affect businesses that operate across local authority lines, including those whose premises, planning consents, or rate assessments straddle council borders. The Scottish Government has not yet published a formal options paper, but the Independent Review of Qualifications and Assessment under Hayward showed how quickly a review can move from discussion to policy once political will aligns, and that lesson applies here.
The timeline is unclear, and council leaders opposing radical change have political leverage they will use. But the direction of travel is set. The Scottish Government has made clear it wants a leaner, more efficient local government structure, and the Verity House Agreement gives it a framework to push that through with at least nominal buy-in from COSLA. Businesses with significant council dependencies, particularly those in construction, facilities management, education supply, and social care, should treat this as a live risk rather than a distant possibility. The consultation phase, when it comes, will be the moment to make your voice heard through your local chamber of commerce or FSB Scotland branch.