Tesco is to repay the £585m worth of business rates relief it received from the government during the coronavirus pandemic. The move follows criticism that the major supermarkets have benefitted from the relief at a time when they are seeing strong sales whilst other sectors are in dire need of extra support.
Tesco, which had to defend its decision to pay a £315m dividend to shareholders in October, stressed that every penny it had received was spent on its response to the pandemic which it estimates will cost it around £725m this year.
Business rates relief was extended to all retailers in March as part of a package of government measures to support businesses during the crisis. The supermarket said the move was a “game-changer” in the early stages of the pandemic as it gave it the confidence to invest in its staff, online capacity, suppliers and Covid-19 safety measures.
However, Tesco added that its business had “proven resilient in the most challenging of circumstances”, leading to its decision to return the taxpayer money it received in full. The company said it would work with the UK government and devolved administrations on the best means of doing that.
Chief Executive Ken Murphy stated: “Every decision we’ve taken through the crisis has been guided by our values and a commitment to playing our part. In that same spirit, giving this money back to the public is absolutely the right thing to do by our customers, colleagues and all of our stakeholders.”
Analysis of government data by property adviser Altus showed that £1 in every £6 of rates relief went to the Big Four supermarket chains. Sainsbury’s is to benefit by almost £500m, Asda by £297m and Morrisons by £279m, with the discounters Aldi and Lidl also enjoying a boost of over £100m each.
Tesco’s move ramps up pressure on its rivals to follow suit. Some analysts suggested the repayment offer will be seen as an attempt to ward off potential profit penalties as the Treasury tries to restore the country’s finances through targeted tax rises in the future.
NAM Implications:
- A pointer for the other mults and discounters.
- Meanwhile, suppliers, retailers and shoppers need to anticipate tax-hoovering by HMRC…
- …to pay for Lockdown support.
