Morrisons follows Tesco in paying business rates during pandemic

LONDON (Reuters) - British supermarket group Morrisons on Wednesday joined market leader Tesco in deciding to pay government business rates for the period of the COVID-19 pandemic.

FILE PHOTO: A Morrisons supermarket is seen in Weybridge, Britain, August 19, 2016. REUTERS/Peter Nicholls

In March, the British government exempted all retailers from paying the tax on their store networks for the 2020/21 year to help them get through the crisis.

Britain’s supermarket groups have performed well during the pandemic but have been criticised by lawmakers and media for paying shareholders dividends whilst receiving taxpayer money in the form of property tax relief.

They justified taking the relief because of the huge costs they incurred in feeding the nation during the crisis.

However, earlier on Wednesday, Tesco said it would repay the 585 million pounds it has claimed because some of the risks of the crisis were now behind it and returning the money was “the right thing to do.”

That stance put pressure on rivals to do the same.

Morrisons, the UK’s fourth largest grocer, later committed to paying business rates for the coronavirus period in full.

It said the total amount to be paid will be 274 million pounds ($366 million) of which 230 million pounds relates to its 2020/21 financial year.

Morrisons said it now expected direct COVID-19 costs to be around 270 million pounds, about 40 million pounds more than its estimate in September.

Excluding the business rates payment Morrisons still expected 2020/21 underlying pretax profit in line with its expectations.

The group also plans to pay a special dividend of 4.00 pence per share to shareholders in January. The payment relates to the second half of its 2019/20 year, which pre-dates the crisis.

It forecast 2020/21 year-end net debt to be around 1.7 billion pounds and said it had no plans to pay a special dividend for that year.

“We are grateful for the government’s swift action at the start of the pandemic which enabled the whole sector to face squarely into the challenges and disruption caused by COVID-19,” said CEO David Potts.

Morrisons shares closed down 2.3%, while Tesco’s were down 1.9%.

Shares in Sainsbury’s were down 2.9%.

Sainsbury’s and Walmart owned Asda declined to comment.

Clothing and food retailer Marks & Spencer said it has no plans to return the relief. M&S claimed business rates relief of 83.7 million pounds ($111.4 million) in its first half to Sept. 26 and can claim for its second half too.

Reporting by James Davey; Editing by Elaine Hardcastle