United Kingdom: Tesco decides to repay business rates relief
The UK government has provided many businesses with extensive financial support during the COVID-19 pandemic. One of the measures was a business rates (property tax) “holiday” for 12 months. However, there has been criticism in the media about some of the larger retailers, e.g. supermarkets, taking this support but, at the same time, making substantial profits and paying dividends to their shareholders. Here is an announcement from one of them, Tesco, stating that it will pay the business rates that would have been paid were it not for the relief.
The Board of Tesco PLC announces today [2 December 2020] its decision to repay to the UK Government and the Devolved Administrations the £585m of business rates relief received in respect of the COVID-19 pandemic.
In March, the UK faced an unprecedented situation as the pandemic took hold.
For food retailers, the impact was immediate and potentially disastrous: panic buying, severe pressure on supply lines, major safety concerns and the risk of mass absences from work, culminated in a real and immediate risk to the ability of supermarkets to feed the nation.
We are immensely grateful for the financial and policy support provided to us by the governments of the UK. This was a game-changer and allowed us to ensure customers got access to the essentials they needed.
The decision at the time to provide rates relief to all retailers was hugely important. These funds meant that we had the immediate confidence, in the face of significant uncertainty, to invest in colleagues, and support our customers and suppliers. We are immensely proud of our colleagues for their remarkable efforts during Covid.
Every penny of the rates relief we have received has been spent on our response to the pandemic. Our latest estimate at our Interim Results in October was that Covid would cost Tesco c.£725m this year – well in excess of the £585m rates relief received.
Ten months into the pandemic, our business has proven resilient in the most challenging of circumstances. While all businesses have been impacted – many severely so – we have been able to continue trading throughout, serving many millions of customers every day and although uncertainties still exist, some of the potential risks faced earlier in the year are now behind us. We remain absolutely committed to doing the right thing by our customers, colleagues and all our stakeholders.
We are therefore announcing that we will return to the public the business rates relief received in full. We will work with the UK Government and Devolved Administrations on the best means of doing that.
Ken Murphy, Group Chief Executive:
“Our colleagues have done an exceptional job in responding to the challenges of the pandemic. We have invested more than £725m 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.”
John Allan, Chairman:
“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.”
Note on guidance:
The accounting treatment of the repayment of business rates relief in our Full Year Results has not yet been determined.
Excluding the repayment, our guidance for retail operating profit before exceptional items for 2020/21 is unchanged: we expect it to be at least the same level as 2019/20 on a continuing operations basis.
The cash impact of the repayment of £(585)m is split c.£(535)m in this financial year and c.£(50)m in the 2021/22 financial year.