The Times - UK (2020-12-03)

44 1GM Thursday December 3 2020 | the times

Business

Behind the story

I

f every little helps, as

Tesco says, then

£585 million helps an

awful lot (Philip

Aldrick writes).

Under pressure, the

dividend-paying

supermarket chain has

decided to hand back its

share of business rates

relief for struggling

retailers. But what should

the Treasury do with the

Christmas windfall?

Tesco’s contribution

may look tiny compared

with the £280 billion of

emergency coronavirus

support this year, but it is

a large slug of the total

£11.5 billion relief for the

retail, hospitality, leisure

and nursery sectors. If

every supermarket were

to follow suit, the

Treasury might claw

back between £2 billion

and £3 billion.

A sum that large would

help it with at least one

difficult decision. Six

million families are due

to lose this year’s extra

£1,000 of welfare support

in March. The chancellor

is expected to extend it,

but £6 billion a year is not

cheap. Public services are

also due a £10 billion

spending cut from 2022,

compared with March

plans. Perhaps half will

be met by cutting the aid

budget and public sector

pay restraint, but a little

help from the grocers

would go a long way.

The Society of

Independent Brewers was

quick to suggest

redistributing Tesco’s

£585 million to the 40,000

pubs and 2,000 breweries

in tiers two and three

facing hardship under the

restrictions. The Treasury

could gift them £14,000

each on Tesco’s account,

“making up for the

derisory £1,000 offered to

wet-led pubs”, it said.

Or how about using the

funds to beef up HM

Revenue & Customs’

fraudbusters? The

Treasury gave HMRC an

extra £20 million last

week to “ensure

compliance with Covid-19

support schemes”. The

National Audit Office

estimates that £9 is

recovered for every £1

spent tackling fraud. At

that rate, the £585 million

would recoup £5 billion.

There is a lot of fraud.

The NAO reckons

£3.5 billion has been

extorted from the

furlough scheme and

£26 billion from bounce

back loans.

Yet surely the most

appropriate place to

spend the money would

be on Britain’s battered

high streets. The

government has a

£1 billion Future High

Street Fund to reinvent

city centres by improving

access, converting empty

retail units into homes

and offices and investing

in infrastructure. Why

not top that up? A

hundred towns are in the

scheme. Tesco could pay

for 50 more.

vote on whether to hand back rates was

on the scheduled board meeting’s

minutes and it passed unanimously.

Dave Lewis, the former boss of Tesco,

had defended the supermarket’s right

to the business rates relief, insisting that

“every penny” of government support

had gone on safety measures, recruit-

ing staff and investing in online to

support the boom in deliveries.

Mr Allan said in October that he

would “defend to the death” the board’s

decision to pay the dividend after

receiving the tax break. While

supermarkets believed that dividend

payments and business rates relief were

separate points, they started to under-

stand that the public didn’t.

One supermarket source said that in

the early days of the pandemic it had

felt like wartime, with colleagues

referred to as “frontline workers”.

There was a common feeling that

supermarkets were staying open and

asking their employees to put them-

selves at risk. However, as the grocers

reported a boom in sales, their extra

costs have seemed like a small expense

compared with others that have suf-

fered months of depressed sales.

Britain’s biggest grocer led the way,

and by the end of the day rival WM

Morrison followed.

It may be harder for others. While

half a billion pounds is a huge figure, it

is equivalent to one month of Tesco’s

cashflow and a fraction of its £21.9 bil-

lion market capitalisation. For Sains-

bury’s, its great rival now valued at

£4.6 billion, handing back £230 million

might not be as easy.

Every little helps, leading article, page 37

1

Rishi Sunak has warned that

the huge levels of debt built up

by the government in the fight

against Covid-19 could become

unaffordable if there is a sudden

rise in interest rates. The Treasury

is likely to borrow £370 billion this

year, more than double the

£158 billion deficit in the peak year

of the financial crisis. Page 4

2

Michel Barnier has been

warned by France and five

other European Union

member states not to concede too

much to the UK in efforts to get a

Brexit deal over the line. The EU’s

chief negotiator briefed MEPs and

ambassadors yesterday after

France, Spain, Italy, Belgium, the

Netherlands and Denmark raised

concerns over the conduct of the

talks. Page 6

3

Tesco and Morrisons are to

repay more than £850 million

of taxpayer support between

them after criticism over

benefiting from a business rates

holiday while enjoying a surge in

sales during the pandemic and

paying big dividends to

shareholders. Page 43

4

Britain imported more goods

from China than from any

other country at the height of

the epidemic, for the first time on

record. One pound in every £7 of

goods bought by the UK came

from there in the second quarter

as Chinese companies sold goods

worth £11 billion to Britain. Page 43

5

Lady Green, former owner of

Arcadia, has brought forward

a £50 million payment to its

pension scheme, pledging to hand

over the cash within ten days. The

Monaco-based wife of Sir Philip

Green, who ran Arcadia, said she

would not wait until September

2021. Page 43

6

The bosses of Britain’s biggest

companies have 41 times

more incentive to hit financial

targets than to attain goals linked

to the health, advancement and

morale of their employees,

according to a report by the

Chartered Institute of Personnel

and Development and the High

Pay Centre. Page 46

7

Allied Universal, the American

security company, has a week

to make an offer for G4S after

Gardaworld, its smaller Canadian

rival, raised its takeover bid for the

British company to £4.45 billion in

a final offer that expires on

December 16. Page 48

8

The battle to take control of

Countrywide escalated as its

board rejected a 250p-a-share

bid from Connells, a rival estate

agency, and as Alchemy, a private

equity firm, made a revised

investment offer. Page 49

9

Almost 1,600 jobs at

Bonmarché are at risk after

the womenswear retailer fell

into administration. RSM has been

appointed to find a buyer for 225

shops. Page 50

10

Legal & General is among

landlords that have begun

dipping into rent deposits

to cover billions in rent arrears

accumulated by businesses during

the pandemic. The investment

manager said that it had to

“protect the pensioners whose

money we look after”. Page 51

Need to know

Top brass couldn’t ignore

A month ago Tesco executives had an

uncomfortable Zoom meeting with a

group of Conservative MPs. Esther

McVey, who has been spearheading a

blue-collar Tory campaign, made clear

that while they were appreciative of the

efforts Britain’s biggest supermarket

had made in keeping the nation fed

during the peak of the crisis, that was

several months ago. Tesco now needed

to hand back the £585 million of

taxpayer support it had received, par-

ticularly after it had just handed

£900 million to shareholders in a divi-

dend. “It is the right thing to do,” she

wrote in a follow-up letter.

The call helped to foster the realisa-

tion at the top of Tesco that a U-turn

was required.

John Allan, Tesco’s chairman, has

ruled out government interference and

it is understood that the supermarket

wasn’t spooked into refunding the rates

relief cash by rumours of a looming

“lockdown winners” windfall tax.

Instead, it has been a matter hotly

debated between a small group of

Tesco’s top team who were shown press

cuttings on a daily basis. They under-

stood the coverage risked overshadow-

ing the work Tesco had done to support

communities during the pandemic.

“The arguments for holding on to the

money were becoming weaker and

weaker,” Mr Allan told The Times. “If

you close your ears to what people are

saying and hunker down and never be

prepared, that’s not very wise.”

Julian Richer, the boss of Richer

Sounds, told the CBI annual confer-

ence last month that the supermarkets

“should refund their rates bill”. John

Roberts, boss of AO World, the online

retailer, said supermarket chiefs should

ask their “mums if they were proud”.

As the debate intensified, Tesco was

starting to feel more confident about its

prospects. Ken Murphy, its chief execu-

tive, said that the business had spent

more than £725 million dealing with the

pandemic, less than the £925 million it

thought it would have to invest.

A doubling of its online capacity and

lower staff absences mean that Tesco is

prepared for further lockdowns. Covid

vaccines have boosted future prospects.

In a letter to staff seen by The Times,

Mr Murphy said: “While the pandemic

is far from over, our ten months of expe-

rience so far have really proven the

resilience of our business, in the most

challenging of circumstances... There

are still uncertainties, but many of the

potential risks our business faced

earlier in the pandemic are behind us.”

Such was the level of concern that

Tesco’s 14-strong board had a virtual

meeting that stretched over two days.

The first call on Monday was to discuss

the debate around business rates relief,

where it became apparent that there

was agreement. The following day a

Huge queues, empty

shelves and long

waits for home

deliveries were all

part of the grocery

experience this year

Grocers faced pressure to return cash

Tesco chiefs realised

popular opinion had

turned against them,

Ashley Armstrong and

Alistair Osborne write