Tesco hands back £585m from business rates holiday

By Simon Neville, PA City Editor
·6-min read

Supermarket Tesco has said it will return £585 million to the Government – money 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.

Business Secretary Alok Sharma said it was a “very welcome gesture”.

The decision led to calls for other supermarkets to make similar commitments, with new data from business rates specialists Altus Group showing “essential” retailers enjoyed savings of £3.03 billion.

Tesco chairman John Allan
Tesco chairman John Allan said the retailer is “conscious of our responsibilities to society” (Tesco/PA)

There are also calls for the money to be handed to the pub sector, which is struggling hardest from the new restrictions.

Sainsbury’s, Asda, Aldi, Lidl, Morrisons, Co-op, Waitrose, Iceland and B&M Bargains have been approached to ask if they would follow Tesco’s lead.

Co-op said the amount spent on protecting staff and customers outweighed the savings.

It added: “Given the huge uncertainty we’re facing into still and the ongoing costs we are incurring, we’ll consider our approach in terms of the Government support we’ve received at year end.”

A spokesman for Waitrose-owner The John Lewis Partnership said: “We are incredibly grateful for this vital support because we have lost significant sales while our John Lewis shops have been closed, and have invested heavily to keep our partners and customers safe.

“The outlook remains incredibly uncertain and Government support remains crucial to help us navigate the crisis.

“We’re a business owned by our employees – our partners, not external shareholders – and we don’t intend to pay a bonus this year.

“Whenever we make any money, it is invested in our partners, our business and charitable giving.”

The remaining retailers declined to comment. Shares in Sainsbury’s, Morrisons and B&M all fell on Wednesday as investors expect pressure to increase on them to match Tesco’s move.

Conservative MP Esther McVey tweeted calling on them to follow suit.

She wrote: “Tesco is leading the way & returning £585 million back to government – the business rates exemption provided during the pandemic.

“Other supermarkets need to follow suit.

“Whilst they don’t need this money others do.”

Mayor of Greater Manchester Andy Burnham also tweeted: “This is the right move from Tesco.

“I call on other supermarket giants to follow suit.

“Together they’ve had over £1.3 BILLION in business rates grants. The money should be earmarked for Tier 3 areas & the 3 million people excluded from public support.”

Data compiled last month for the PA news agency by real estate adviser Altus Group projected that the UK’s four largest grocers – Tesco, Sainsbury’s, Asda and Morrisons – and German rivals Aldi and Lidl 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. It is understood this will be via HM Revenue and Customs.

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%.

Tesco chief executive Ken Murphy said the company spent £725 million on improvements and safety measures – including increasing online sales.

He said: “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.

“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.”

Sainsbury’s and rivals have all benefitted from having “essential” status and remaining open throughout lockdowns (Danny Lawson/PA)

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.

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.