The Times - UK (2020-12-03)

(Antfer) #1

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


  1. 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

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