The business rates bust-up as retailers hand back cash

Until last week UK supermarkets had behaved like “brothers in arms”, says Sam Chambers in The Sunday Times. They “uniformly” rebuffed calls to return the “contentious £2bn-plus tax windfall” that they had received from the Treasury’s 12-month business rates holiday, “despite continuing to pay dividends”. However, last week Tesco declared that it would return the £585m it had been given. This triggered a “domino effect”, with Morrisons, Sainsbury’s, and B&M following suit.

Despite most of the supermarkets now pretending that they have been considering returning the cash “for some time”, it was only Tesco’s action that forced their hand, says Ben Marlow in The Daily Telegraph. Even Tesco doesn’t really deserve any praise since its decision came as a result of a “fierce and sustained” public backlash.

Of course, the supermarkets maintain that “massive uncertainty” combined with the fact that they were open during the pandemic in “difficult circumstances” justified the subsidy. However, the tax break was clearly intended for retailers and firms forced to close their doors.

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An essential furniture and toys retailer

Probably the most “gratuitously undeserved” handout, however, went to B&M, says Nils Pratley in The Guardian. It sells some food, so it qualified as an “essential retailer” and stayed open, but its shelves are mostly filled with “toys, games, furniture, stationery and rugs”. With most of its non-food competitors “ruled offside”, B&M had the “freedom of the inessential pitch”, so it reported “a 30% improvement in like-for-like sales in a six-month period” and a “near-doubling of top-line profits to £296m”. The decision to give B&M £38m of relief on rates looks “obscene”.

As for Tesco, its decision to break ranks wasn’t as generous as it might appear, says Bryce Elder in the Financial Times. While Tesco received the most in absolute terms, the support mattered more to J Sainsbury, whose Argos chain was classed as non-essential. The amount that Sainsbury has had to return “equates to nearly 10% of its market value, versus less than 3% for Tesco”. A cynic might conclude that Tesco’s motivations “have an element of game theory”, in that it has “invited mutual harm from which it expects to suffer the least”.

Meanwhile, you can see why John Lewis, which owns Waitrose, is “breaking with the supermarket pack to cling to tens of millions of pounds of pandemic tax relief”, says Christopher Williams in The Sunday Telegraph.

Under “massive financial pressure”, the group has borrowed £300m from the Bank of England’s emergency loans scheme, taken out £150m in new bank loans and sold Waitrose property for £135m. John Lewis’ financial problems underline the fact that the post-pandemic high street “will be a... poorer and less diverse place”.