Tesco to return £585 million from business rate holiday

2 December 2020, 08:47

Supermarket Tesco has said it will return to the Government £585 million it saved from a business rates holiday introduced to help struggling retailers.

Chairman John Allan said the board "are conscious of our responsibilities to society" and that the company did not need the saving due to remaining open and trading strongly throughout the pandemic.

The decision comes as supermarkets face growing calls to hand back the savings which were aimed at helping retailers that were unable to open and struggling to make ends meet.

Read more: Tier restrictions in force: Millions of people in England wake up to new rules

Read more: Scotland Yard and Mayor warn Londoners to respect Tier two to save lives

Data compiled on the UK's four largest grocers - Tesco, Sainsbury's, Asda and Morrisons - and German rivals Aldi and Lidl projected that they would save around £1.87 billion as a result of the rates holiday.

This was set to represent more than a sixth of the total £10.1 billion rates bill which has been written off for all businesses during the year.

Bosses at Tesco said they will work with the Government on how best to hand over the money.

Mr Allan said: "The board has agreed unanimously that we should repay the rates relief we have received.

"We are financially strong enough to be able to return this to the public, and we are conscious of our responsibilities to society.

"We firmly believe now that this is the right thing to do, and we hope this will enable additional support to those businesses and communities who need it."

In October, Tesco revealed it made a pre-tax profit of £551 million in the six months to August 29 - an almost 29% increase compared with the same period in 2019.

Sales during that period were up 0.7% to £28.7 billion, with sales in the UK and Ireland up more than 8%.

"Businesses are being hammered because of Covid without proper financial support," says Sadiq Khan

Tesco chief executive Ken Murphy said: "We have invested more than £725 million in supporting our colleagues, putting safety first, more than doubling our online capacity to support the most vulnerable customers in our communities, and hiring thousands of additional colleagues at a time of need.

"While business rates relief was a critical support at a time of significant uncertainty, some of the potential risks we faced are now behind us.

"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."

Early in the pandemic Tesco and rival supermarkets faced criticism for taking the rates relief at the same time as handing out dividends to shareholders. It did not use the Government's furlough scheme.

Robert Hayton, head of property tax at business rates specialist Altus Group said: "It should have been obvious from the outset that not all businesses would need the same level of taxpayer support through the pandemic.

"It is great that Tesco has taken the lead and repaid this relief.

"The Government must now redeploy that revenue to where it is most needed."

Rates relief was first announced by the Chancellor for retail, leisure and hospitality firms until March 2021.

The data from Altus Group showed that Sainsbury's is expected to save £498 million from its rates holiday for the year - although Sainsbury's said it was closer to £450 million.

Last month, Sainsbury's said it had received a break worth £230 million for the half-year to September in an update which also saw it reveal plans to axe 3,500 jobs.

However, the company came under fierce criticism as it also declared an interim dividend of 3.2p plus a special dividend of 7.3p for shareholders.

In November, the boss of value retailer B&M Bargains, which has stayed open through the lockdowns, paid his offshore family trust £44 million in dividends as it saved £38 million through the rates holiday.

Julian Richer, chief executive of non-essential retailer Richer Sounds, said previously that he was "really annoyed" that the grocery chains had benefited from the tax break as they also saw "queues around the block".

The figures from Altus show Asda is projected to save £297 million, Morrisons around £279 million, Aldi £109 million and Lidl £108 million, for the year.

In Wales, the six major supermarkets still had to pay around £78 million for rates for some stores as a result of devolved business rates.