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UK supermarkets 'do the right thing' repaying £1.7bn COVID-19 tax breaks

Tom Belger
·Finance and policy reporter
·4-min read
People observe social distancing while queuing at a Sainsbury's supermarket at Colton, on the outskirts of Leeds, the day after Prime Minister Boris Johnson put the UK in lockdown to help curb the spread of the coronavirus.
Sainsbury's will repay business rate relief. Photo: PA

Sainsbury’s (SBRY.L), Aldi, Asda and Morrisons (MRW.L) will repay the government for savings made under a tax break for UK firms struggling during the pandemic.

The four supermarkets made the announcements on Thursday, just a day after Britain’s biggest grocer Tesco (TSCO.L) confirmed a similar decision to pay back £585m ($783.7m) in business rate relief.

But the moves will focus attention on other retailers that have not decided to forgo the tax relief, with Waitrose owner John Lewis Partnership and the Co-op declining to hand over cash.

Sainsbury’s said it would repay the UK government and devolved administrations around £440m, while Asda will hand back around £340m, Morrisons £274m, and Aldi more than £100m. It means an unexpected £1.7bn windfall for the Treasury coffers.

The UK government introduced the temporary tax cut for retail, hospitality, leisure, and nursery firms in England in April, with similar measures announced soon after elsewhere in the UK.

READ MORE: Tesco repays £585m business rate relief

Supermarkets came under fire for taking the relief earlier this year as they have been able to remain open throughout the pandemic, unlike many other firms receiving support.

“Essential” retailers have also faced criticism for continuing to profit from sales of non-essential products, and Sainsbury’s and Tesco’s decision to pay dividends sparked further controversy.

WATCH: Major supermarkets to return £1.3bn in business rate relief

Simon Roberts, CEO of Sainsbury’s, said: “While we have incurred significant costs in keeping colleagues and customers safe, food and other essential retailers have benefited from being able to open throughout.

“With regional restrictions likely to remain in place for some time, we believe it is now fair and right to forgo the business rates relief that we have been given on all Sainsbury's stores.

READ MORE: City centre grocery stores struggles as shoppers stay in suburbs

“We are very mindful that non-essential retailers and many other businesses have been forced to close again in the second lockdown and we hope that this goes some way towards helping them.”

Aldi’s CEO Giles Hurley said repaying the cash was “the right decision to help support the nation.”

Asda’s CEO and president Roger Burnley said it had always “sought to do the right thing” during the pandemic, noting there were “other industries and businesses” that would suffer for longer from COVID-19. “As the hope of a vaccine and a more ‘normal’ life returning in 2021 grows, we have confidence that we are in a strong position to again do the right thing for the communities we serve.”

Morrisons’ statement said it had been considering “the implications” of the business rate holiday for some time. It indicated it had previously been planning to decide on repayment once the full cost and duration of the pandemic had become clear.

But it said the decision had been “brought forward,” suggesting it may have felt pressured into an announcement by Tesco’s decision.

READ MORE: UK faces ‘serious’ Brexit border disruption to goods supplies

Not every grocer handed back the cash. A Co-op spokesperson said the savings had been lower than extra costs incurred because of the pandemic such as protective measures for customers and staff.

They highlighted “huge uncertainty” and ongoing costs, adding: “We’ll consider our approach in terms of the Government support we’ve received at year end.”

Waitrose also has no plans to return savings. A spokesperson for the John Lewis Partnership, which includes the supermarket chain, 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.”

WATCH: Tesco business rate decision pressures rivals to follow its lead

The John Lewis spokesperson also highlighted the employee-owned organisation’s decision not to pay a bonus to staff this year for the first time in decades. “Whenever we make any money, it is invested in our partners, our business and charitable giving."

Retail analyst Steve Dresser asked on Twitter: “Is that now deemed acceptable? It's ok because it's John Lewis? Waitrose didn’t have to close.”

Several supermarkets highlighted the importance of receiving the support in the first place even as they announced they would repay the money.

Hurley said Aldi had faced “increased costs” during the coronavirus crisis.

David Potts, chief executive of Morrisons, said the government’s support had “enabled the whole sector to face squarely into the challenges and disruption caused by COVID-19.”

Meanwhile Tesco had called the support a “game-changer” earlier this week, adding that “every penny” had been spent responding to the pandemic.

“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,” said Tesco’s statement.