// Tesco, Sainsbury’s, Morrisons, Asda, Aldi & Lidl set to benefit from almost £2bn in business rates relief this year
// This represents more than 1/6 of the total £10.1bn business rates bill written off for all businesses during the year
// At the start of the Covid-19 pandemic the Chancellor announced a business rates holiday until March 2021
The UK’s biggest grocery chains are set to benefit from almost £2 billion in business rate tax breaks this year despite sales soaring during the pandemic, according to new analysis.
It comes after Sainsbury’s and Tesco both paid millions to shareholders in dividend payouts despite accepting government support in the form of business rates relief for the 2020-21 financial year.
At the start of the Covid-19 pandemic, Chancellor Rishi Sunak announced a business rates holiday for retail, leisure and hospitality firms until March 2021.
- Grocery sales surge 9.4% on the back of record online sales
- Supermarket bosses urge MPs to extend pre-Christmas Sunday trading hours
New data compiled for the PA news agency by real estate adviser Altus Group projects the UK’s Big 4 grocers – Tesco, Sainsbury’s, Asda and Morrisons – and German discount rivals Aldi and Lidl will save around £1.87 billion as a result.
This is set to represent more than one sixth of the total £10.1 billion business rates bill which has been written off for all businesses during the year.
Tesco, regarded as the UK’s biggest employer and largest grocery chain by market share, is expected to receive a benefit of around £585 million from the tax break, Altus said.
Sainsbury’s is expected to save £498 million from its rates holiday for the year.
Last week, Sainsbury’s said it had received a break worth £230 million for the half-year to September in a trading update which also saw it reveal plans to axe 3500 jobs.
However, the retailer came under fierce criticism as it also declared an interim dividend of 3.2p plus a special dividend of 7.3p for shareholders.
Sainsbury’s said its business rates holiday was more than offset by an increase in costs, due to the pandemic, and added that a large portion of the dividend payout related to trading before the pandemic.
Last month, Tesco paid £315 million in dividends to shareholders despite its own rates windfall.
Retail analyst Richard Hyman said “something doesn’t feel right or smell right” about dishing funds out to shareholders in the circumstances.
“In my opinion, the timing of the dividend announcements just feels like a PR own goal,” he told PA.
“Tesco and Sainsbury’s have both paid some dividends related to trading before March which I think is fair, but after that you can question it.
“Since the pandemic, there has been great public support for the work supermarkets have done and this risks knocking that back.
“They have also taken on big costs. The shift to online will not help them run profitably, so it is definitely quite a complex issue.”
On Wednesday, B&M chief executive Simon Arora paid his offshore family trust £44 million in dividends as the retailer, which stayed open during lockdown as it was classed as essential, saved £38 million through the business rates holiday.
Last week, Julian Richer, chief executive of non-essential retailer Richer Sounds, said he was “really annoyed” the grocery chains benefited from the tax break as they also saw “queues around the block”.
The figures from Altus show Asda is projected to save £297 million, Morrisons around £279 million, Aldi £109 million and Lidl £108 million, for the year.
Robert Hayton, head of property tax at Altus Group, said: “Some parts of the retail sector have managed to thrive during the pandemic and the rates holiday has been the icing on an already very sweet cake.
“But, with hindsight, did the Big Four need around £1 in every £6 of business rates relief made available?”
In Wales, the six major supermarkets still had to pay around £78 million for rates for some stores as a result of devolved business rates.
with PA Wires