Tesco to pay back £585m Covid business rates relief
2 Dec 2020
Tesco is to repay all of the £585m of business rates relief the company received in respect of the Covid-19 pandemic, saying it was ‘absolutely committed to doing the right thing’
2 Dec 2020
The retailer had previously faced criticism for continuing to pay a £315m shareholder dividend whilst also drawing on a government support scheme.
In its announcement of the decision to hand back the money to the UK government and the devolved administrations, Tesco described the business rates relief off as ‘a game-changer’ in the early days of the coronavirus crisis.
The company’s statement said: ‘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 company said that ten months into the pandemic, the business was proving resilient and some of the potential risks faced earlier in the year had been overcome, leading to the decision to return the business rates relief cash.
However, it also pointed out estimates in its interim results in October showing that Covid would cost Tesco some £725m this year in additional safety precautions and the costs of adding staff and online capacity, which it said was well in excess of the £585m rates relief received.
Ken Murphy, Tesco group chief executive, 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.
‘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 said the accounting treatment of the repayment of business rates relief in its full year results has not yet been determined.
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.