Tesco to repay £585m business rates relief

The supermarket chain said it had used all the money to respond to the pandemic but that its business had proved resilient. Tesco said the Covid-19 crisis would cost it about £725m in 2020.

Tesco increased its first-half payout in October to £315m, taking dividends during the crisis to almost £1bn. The decision to reward shareholders while taking government support has drawn criticism from politicians and the press.

Britain's biggest physical retailer said it would work with the UK government and devolved administrations to find the best way of returning the money. It said excluding the repayment its guidance for annual retail operating profit was unchanged.

Tesco said financial support from the government early in the crisis gave it the confidence to hire more workers and support suppliers. After 10 months of the pandemic Tesco's business has held up well and it no longer needs the money, it said.

Chairman John Allan said: "The board has agreed unanimously that we should repay the rates relief we have received. We are financially strong enough to be able to return this to the public, and we are conscious of our responsibilities to society. We firmly believe now that this is the right thing to do, and we hope this will enable additional support to those businesses and communities who need it."

The company's move will put pressure on Sainsbury's, Morrisons and other supermarkets that have paid dividends during the crisis to repay business rates relief. The big four grocers together with Aldi and Lidl are estimated to have saved about £1,9bn from the measure.

Independent retail analyst Nick Bubb said: "The news that Tesco wants to repay the £585m of business rates relief it received from the government is admirable in many ways, although some will see it as bowing to media criticism of its dividend policy and it will put a lot of pressure on its less strong peers to follow suit."

Tesco shares fell 1% to 226.60p at 08:34 GMT. Sainsbury's shares dropped 3.75% and Morrisons fell 1.1%.