Sainsbury’s, Asda, B&M and Aldi have agreed to join rivals Tesco and Morrisons in repaying emergency taxpayer support, taking the total handed back to the Treasury by major high street names from a business rates holiday to more than £1.8bn.
The John Lewis Partnership, which owns Waitrose, and Marks & Spencer were adamant on Thursday that they would not return the money, despite also benefiting from strong food sales during the pandemic. They said the government support had helped counteract the devastating impact of the coronavirus crisis on their respective clothing arms. In November M&S reported its first-ever loss, while John Lewis, which has cancelled the 2021 annual staff bonus, is headed for a full-year loss.
On Thursday the big household supermarket names fell into line behind Tesco and Morrisons, which on Wednesday said they would pay a combined business rates bill of £859m. On Thursday, first Sainsbury’s and then Asda, B&M and Aldi pledged to pay close to £1bn into depleted government coffers.
The supermarkets and discounters, such as B&M, faced fierce criticism for accepting rates relief despite their stores remaining open and their sales booming throughout the pandemic. The tax break was a blunt instrument intended by the chancellor, Rishi Sunak, to prop up retailers barred from trading during the lockdown.
The listed companies, Tesco, Sainsbury’s, B&M and Morrisons, added fuel to the fire with their decision to pay big dividends to shareholders.
The chief executive of Sainsbury’s, Simon Roberts, said his supermarket would stump up £440m of its business rates bill but was hanging on to £45m of financial support for Argos stores, which were forced to close.
Keeping staff and customers safe had increased the running costs of the UK’s second largest grocery chain but Roberts acknowledged that food retailers had “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.”
Asda, which is the process of being sold by the US chain Walmart to a consortium led by petrol station tycoons the Issa brothers, also said it would now pay its £340m business rates bill in full.
Roger Burnley, Asda’s chief executive, said during the pandemic the supermarket had “always sought to do the right thing”, adding: “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.”
The German discount chain Aldi, which is the UK’s fifth-largest supermarket with 900 stores, also confirmed on Thursday it would return the “full value of the business rates relief it has received”, which was more than £100m. Giles Hurley, Aldi UK’s chief executive, described it as the “right decision to help support the nation”.
While other retailers and hospitality firms have struggled with lockdown closures and other restrictions, supermarkets have enjoyed a surge in sales during the pandemic, albeit with higher costs linked to Covid-19.
The discount retailer B&M, which had raised eyebrows with a £250m special dividend last month, also said it would now forgo £80m of rates relief. Simon Arora, the group’s chief executive, also pressed for urgent reform of business rates – a property tax – which he said was “contributing to job losses across the retail sector” was “acting as a deterrent to B&M and other potential occupiers taking up vacant space in many locations”.
The pressure on retailers that are trading strongly to pay their way has increased, and is set against a backdrop of an intensifying high street crisis. This week, Debenhams went into liquidation and Arcadia Group collapsed into administration, putting 25,000 jobs at risk. Businesses in other hard-hit sectors, such as entertainment and hospitality, have also been pushed to the brink.
The privately owned German-owned discounter Lidl is now the only one of the big six food retailers yet to commit to repay business rates relief.
John Colley, associate dean of Warwick Business School, said money saved on business rates had effectively been paid out to shareholders by the listed supermarkets. He suggested the companies may have changed tack to avoid being the target of a Covid surplus-profits tax. “Why destroy your reputation with an event which will only last one year?” he said.