Leading UK retailers to repay over £1.7bn of business rates relief

Date : 03 December 2020

Nick Gladding

Senior Retail Analyst

Sainsbury’s, Morrisons, Asda and Aldi have followed Tesco’s lead in deciding to repay business rates relief received from the UK government and devolved administrations during the pandemic. The moves follow criticism of food retailers taking advantage of the scheme while also being able to trade throughout the crisis. Repaying the tax breaks will make it easier for these retailers to pay dividends to shareholders but also increase pressure on competitors to follow their lead.

Tesco to repay £585m

Tesco made the surprise announcement yesterday that it would repay in full the £585m it has received. Describing the support received as a game changer that had allowed it to invest in colleagues and support customers and suppliers, it also pointed out that the relief fell short of the costs it has incurred from the pandemic. Tesco’s latest estimate for the full year from its interim results in October was £725m. Repaying the relief will make it easier for the retailer to return £5bn to shareholders when the sale of its Asian operations completes - expected early next year.

Sainsbury’s extends debt repayment target to return rates relief

Sainsbury’s will also now return the £450m it has received in rates relief on Sainsbury’s stores (but not Argos standalone stores that were forced to close during the lockdowns). To finance this, the retailer will extend its net debt reduction target of £750m by one year to 2022/23. In H1 2020/21 Covid-19 related costs amounted to £290m, significantly more than £230m in rates relief it received.

Morrisons Covid-19 costs higher than predicted

Morrisons has said it will repay the £230m it has received this year, but noted that it expected direct costs associated with Covid-19 to be £270m, £40m higher than it estimated at its interim results in September.  

Asda to repay £340m

Asda has also now said it will waive the business rates relief it has received. In a statement CEO Roger Burnley said: “Almost half our customers are telling us they expect their financial position to worsen in the next 12 months and we recognise that there are other industries and businesses for whom the effects of Covid-19 will be much more long lasting and whose survival is essential to thousands of jobs. We will therefore be discussing with the Government and Devolved Authorities the best mechanism to ensure the relief we have received can go towards helping those that need it most."

Aldi to repay over £100m

Through a short statement, Aldi became the fourth retailer to forgo rates relief. Describing the decision as “the right decision to help support the nation”, CEO Giles Hurley added “Our continued investment for our colleagues and our customers will remain unchanged.”

 

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