Thursday 3 December 2020 8:21 am

Sainsbury’s to forgo business rates relief

Sainsbury’s has decided to forgo the business rates relief on its stores granted by the government since March. 

Lockdown restrictions have remained in place for longer than originally expected and throughout the pandemic all Sainsbury’s stores have been deemed essential retail. Almost all have been open and trading strongly, with the exception of a small number of convenience stores.  

As a result, Sainsbury’s sales and profits have been stronger than originally expected, particularly since the start of the second national lockdown in England, and so the supermarket has decided to forego the business rates relief on all Sainsbury’s stores.

Sainsbury’s CEO Simon Roberts said: “While we have incurred significant costs in keeping colleagues and customers safe, food and other essential retailers have benefited from being able to open throughout. 

“With regional restrictions likely to remain in place for some time, we believe it is now fair and right to forgo the business rates relief that we have been given on all Sainsbury’s stores. We are very mindful that non-essential retailers and many other businesses have been forced to close again in the second lockdown and we hope that this goes some way towards helping them.”

In March the government waived all retail business rates for the financial year in an effort to cushion the blow of the pandemic.

Sainsbury’s decision comes after supermarket rivals Tesco and Morrisons pledged to pay back the business rate relief they have received from the government. Tesco expects its repayment to be around £585m while Morrisons expects to pay back about £230m. 

Sainsbury’s will pay back approximately £410m of business rates relief it has benefitted from. The supermarket said it will agree with the government an appropriate way to forgo the business rates relief as “repayment is not required by law.”

The supermarket giant initially calculated that coronavirus-related costs to the business, including protecting customers and colleagues and the negative impact of Covid-19 on profits would broadly be offset by stronger grocery sales and around £450m of business rates relief. 

Sainsbury’s expects underlying profit before tax of “at least” £270m for the financial year to March 2021, which includes the assumption that it will forgo approximately £410m of business rates relief. 

Assuming the business delivers profits, and cash generation is in line with its £500m per year expectations, Sainsbury’s said it will prioritise the payment of dividends to shareholders over net debt reduction.