Will Waitrose And M&S Refusal To Repay Rates Windfall Backfire?

A major reputational row is brewing over the controversial refusal by Middle-England bellwethers Waitrose and Marks & Spencer to join a growing band of supermarkets, D.I.Y. chains and pets retailers repaying business rates grants to the U.K. Government.

And the pair – which both run a mix of grocery and department stores – are increasingly looking out of line with public and industry sentiment.

U.K. market leader Tesco first put the cat-among-the-pigeons with a surprise announcement on December 2 that it would repay $769 million in business rates relief ahead of a bumper $6.6 billion return of capital to its investors.

It was a move that immediately piled pressure on rival supermarkets to follow suit. As one of the U.K.’s largest ratepayers, the group was a big beneficiary of a year-long business rates holiday announced by the British Government in March, dished out to keep grocers afloat and safeguard food security during the height of the COVID-19 pandemic.

Tesco – which some analysts believe prompted the cashback to put financial pressure on rivals rather than through altruism – had previously defended its decision to accept the relief. While Tesco insisted it had used “every penny” to manage the impact of the coronavirus crisis, chairman John Allan said the board had “agreed unanimously” to repay it. “We are financially strong enough to be able to return this to the public, and we are conscious of our responsibilities to society,” he declared.

That led rivals racing – with varying degrees of enthusiasm – to announce that they would do the same, pledging almost $2.6 billion in business rates relief returns. Tesco, Morrisons, Sainsbury’s, Walmart
WMT
-owned Asda, Aldi, Lidl, and domestic discounter B&M have also been joined by Kingfisher, the owner of D.I.Y. chain B&Q, and the pets superstore Pets At Home, which both benefitted from consumers’ focus on the home and their animals.

On top of that, Amazon
AMZN
will repay $2.6 million in business rates relief it received for Whole Foods Market
WFM
, according to real estate adviser Altus Group.

Asda president and chief executive Roger Burnley said: “Throughout the pandemic we have always sought to do the right thing – fulfilling our role in feeding the nation, protecting our colleagues and supporting our communities…we have confidence that we are in a strong position to again do the right thing for the communities we serve.”

Trio Refuse to Fall In Line With Rivals

By contrast, the member-owned Co-op Group, Marks & Spencer and Waitrose are facing mounting pressure to follow their peers and hand back millions of dollars of business rates relief.

The Co-op – the founder of the co-operative model and known for its ethical standpoint – is also facing growing disquiet from its members after refusing to emulate supermarket rivals.

Several individuals on Co-op’s National Members Council are said to be pressing for the group’s board to make an immediate pledge to waive the $92 million government windfall. It is believed that a $197 million lump sum generated from the Co-op’s insurance arm, as well as the group’s decision to support a new entertainment arena in Manchester, mean the retail arm looks at odds with the wider business. 

But the Co-op has argued that costs incurred by the company’s funeral care operations during the pandemic, and its commitment to pay the National Living Wage from next year, have severely impacted its finances. 

Uncertain Future Says John Lewis Partnership

Meanwhile, Waitrose owner John Lewis Partnership has so far refused to repay business rates relief, adding that government support remains “crucial” as it navigates the crisis. The employee-owned group, which comprises upscale supermarket chain Waitrose and department store chain John Lewis, said the outlook remained “incredibly uncertain”.

It added: “We are incredibly grateful for this vital support because we have lost significant sales while our John Lewis shops have been closed, and have invested heavily to keep our partners and customers safe. We’re a business owned by our employees – our partners, not external shareholders – and we don’t intend to pay a bonus this year. Whenever we make any money, it is invested in our partners, our business and charitable giving.”

However, with money flowing back to the Government coffers, there are vocal calls by commentators such as high street champion Bill Grimsey to create a fund from the repaid relief to help hard-pressed retail independents. The trio of hold-outs are fast risking being branded the Grinch that stole Christmas 2020.