Lidl and Pets at Home are returning more than £130m of emergency taxpayer support after a dramatic U-turn by Tesco, the UK’s biggest retailer, triggered a domino effect that will result in close to £2bn in business rates voluntarily being paid to the Treasury.
Eight major high street names, including the country’s six biggest food retailers Tesco, Sainsbury’s, Asda, Morrisons, Aldi and Lidl, have all pledged to pay their business rates bills for this year.
The group, as well as discounters such as B&M, had come under sustained criticism for taking advantage of the business rates holiday, which sought to bail out stores that had been forced to close during the lockdown.
A failure to repay the money by the stock market-listed retailers Tesco, Sainsbury’s, Morrisons and B&M, who have all been reporting big sales increases, had become increasingly untenable after their decision to pay dividends to shareholders was met with a growing backlash.
However, the John Lewis Partnership, which owns Waitrose, and Marks & Spencer have not acquiesced despite also benefiting from strong food sales during coronavirus pandemic. They argue that they need the government help because of the financial strain placed on their clothing and homewares businesses during the crisis.
On Friday, Christian Härtnagel, Lidl’s chief executive, became the latest food industry boss to cave in on the business rates issue, with the privately owned German chain promising to return more than £100m to the UK government.
Härtnagel insisted Lidl had not been bounced into the decision but had been considering making an about-face “for some time”.
He added: “We are now in a position to confirm that we will be refunding this money as we believe it is the right thing to do.”
The business rates relief had been vital in enabling Lidl to make “quick, unplanned investments” in its stores at the height of the crisis, Härtnagel said but now the company felt sure it would be able to “navigate and adapt to any further challenges brought by Covid-19”.
The supermarkets and discounters have faced fierce criticism for accepting the rates relief as they were, along with DIY stores, classed as essential retail and allowed to remaining open throughout the pandemic.
The tax break was a blunt instrument intended by the chancellor, Rishi Sunak, to prop up retail businesses deemed “non-essential’ and banned from trading during the lockdowns. A gulf has opened up between the food retailers reporting strong figures and the rest of the high street. This week, Debenhams went into liquidation and Topshop and Dorothy Perkins owner Arcadia Group collapsed into administration, putting 25,000 jobs at risk.
Pets at Home, which was also deemed as “essential” by the government, is paying its £29m rates bill, too. Peter Pritchard, the group’s chief executive, said the recent positive news about vaccinations for Covid-19 led it to reassess the level of uncertainty the business was faced with.
Pritchard said Pets at Home’s finances were in robust shape, with the decision to repay the rates relief demonstrating its “commitment to acting responsibly and treating all of our stakeholders fairly”.
With the hospitality industry brought to its knees by coronavirus restrictions, there are plenty of worthy alternative candidates for taxpayer support including struggling pubs and restaurants, analysts say.
John Webber, the head of business rates at the property advisory firm Colliers International, said the windfall could be used to extend the rates holiday for non-food retailers by three or six months, which would cost circa £1.4bn or £2.8bn. It was “inconceivable” that high street chains would be able to resume their high business rates commitments in April, Webber said, particularly after missing out on the lucrative November trading period.