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Tesco is to pay back the £585m in business rates relief accepted from the government to help it weather the coronavirus pandemic, months after paying investors hundreds of millions in dividends after sales soared.
Tesco, which said “every penny” of the rates relief had been spent on responding to the pandemic, added that in making the repayment it was “conscious of our responsibilities to society”.
In total, the big six supermarkets – Tesco, Sainsbury’s, Asda, Morrison, Aldi and Lidl – will save £1.9bn in bills during the tax year to 31 March 2021, according to figures from Altus Group, a property adviser.
Tesco, which defended its decision to pay a £315m dividend to shareholders in October, is to pay back the rates relief and its move ramps up pressure on rivals to follow suit.
“The board has agreed unanimously that we should repay the rates relief we have received,” said John Allan, the chairman of Tesco. “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.”
The big supermarkets have been heavily criticised for taking the payouts over concerns that taxpayer money could have been directed to sectors that really needed the financial support.
Tesco maintains that the government made the right decision to step in with the support at the beginning of the pandemic, when supermarkets faced being overwhelmed logistically as shoppers started panic-buying, supply lines were stretched to breaking point and there was the possibility of mass absenteeism.
“[There was a] real and immediate risk to the ability of supermarkets to feed the nation,” the company said. “We are immensely grateful for the financial and policy support provided to us by the governments of the UK. This was a gamechanger and allowed us to ensure customers got access to the essentials they needed.”
Tesco said costs relating to the pandemic are estimated to hit £725m this year but paying back the rates relief is the corporately responsible thing to do.
“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,” said Ken Murphy, Tesco’s chief executive. “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.”
Tesco, Sainsbury’s and Morrisons have paid dividends to shareholders even while receiving the state aid. Sainsbury’s disclosed business rates relief worth £230m in the first half of its financial year, while paying £231m in dividends.
The government introduced a 12-month break on business rates in March across England and Wales because it feared the pandemic would strain retailers’ finances, potentially threatening their ability to feed the country. However, the reality proved very different, with big supermarkets enjoying a sales boost, albeit with higher costs.
Altus’s projections showed that Tesco, the UK’s largest supermarket chain, is expected to receive relief worth £585m during the year, while Sainsbury’s will receive £498m. Asda and Morrisons will receive £297m and £279m respectively.
Source: The Guardian
Keyword: Tesco to pay back £585m of Covid business rates relief | Business