Darren Goldney, the Managing Director Of Unitas Wholesale, has criticised the government’s decision to allow Tesco and other major supermarkets to benefit from millions of pounds worth of business rates relief at a time when they are seeing bumper growth.
Tesco’s interim results last week showed its pre-tax profit had climbed 28.7% to £551m despite additional costs of £533m related to extra staffing and safety measures in response to the pandemic. The hike in costs was partially offset by the jump in food sales driven by stockpiling and increased consumption at home. However, Tesco also benefitted from business rates relief of £249m over the six month period, which will increase to nearly £600m for the year as a whole.
Goldney said: “This is a disgrace. The near 30% half-year rise in Tesco’s profit suggests that over the full year it could make an extra £600m – almost exactly the same as the amount of taxpayers’ money the government is handing over to them.
“On the same day of this profit announcement, independent wholesalers supplying hospitals, care homes, community pubs etc are shedding staff, loss-making and reviewing a future of borderline survival.”
Many of Unitas’s 170 wholesale members have lost up to 80% of their trade as a result of lockdown and fear there is worse to come.
“The Scottish Government has shut down the hospitality sector again, and driven consumers back to Tesco and the other national supermarkets,” Goldney continued. “We can see the same happening elsewhere in the UK and whilst we naturally don’t like and may not agree with measures that hurt, we do respect government has to make tough decisions. However, what we can’t respect is an absolute failure to manage fairly the consequence of those decisions and allow ‘viable‘ businesses and jobs go to the wall because they’ve put billions into the wrong place.”
Goldney said it was “absurd” that large supermarket chains should get financial support that enables “huge” profit growth. Highlighting that the hospitality and health care sectors along with other businesses like care homes rely on wholesalers, he said it was “equally absurd” that the government doesn’t understand the need to keep that supply chain viable.
He continued: “I don’t know how these people can sleep at night – the Chancellor and his team who made such a blundersome initial award, and the Tesco management who I’m sure are good people who have worked really hard, but ultimately have been the recipient of both cash they did not need and huge sales increases on the back of the pandemic.
“On our side, the sleepless nights are caused by wholesalers having received no meaningful support at all, especially the business rate relief that we’ve continually asked for. They have been doggedly keeping open critical routes to care homes, hospitals and hospitality, even making a loss to do so. Some just can’t do it much longer.”
Goldney called on the government and businesses that have received a coronavirus “windfall” to “do the right thing”.
He concluded: “Taxpayers money is finite. The money is in the wrong place and ‘wholesale’ is able to laser target it to those in the supply chain who support outlets that our population rely on.”
In a statement responding to the rates row, Tesco said: “We have incurred very significant costs, extra costs, in running the business. In the half-year, those are £533m. Broadly in the full year, we expect those to be about £725m and the rates relief is £533m. So, it’s against the backdrop of serving customers, keeping people fed and giving them what they need and supporting government initiatives against the vulnerable that the business performance should be measured.”
Related item:
Tesco chairman John Allan says he will defend ‘to the death’ board’s decision to pay a dividend – read the full article on the This is Money website
NAM Implications:
- Key will be how this issue plays out in the perception of the consumer.
- i.e. given the relatively different profiles of mults and wholesalers (the public do not understand and are not aware of the wholesaler role), then it is probable that Tesco will come off worse on this occasion.
