Tesco facing no Covid support repayment bill in Ireland

Tesco said it has no Covid supports to repay in Ireland.

Supermarket giant Tesco has said it has no Covid support debt to repay the Irish Government, despite being on the hook for nearly £600m (€670m) in the UK.

The company said it will repay £585m that it received from the UK government, by way of Covid business rates relief, now that some of the risks from the crisis are behind it.

As supermarkets here have never shut during the crisis, Tesco did not qualify for the Irish wage subsidy schemes – the initial Temporary Wage Subsidy Scheme being reliant on a company suffering a 25% fall in turnover due to Covid restrictions.

Last month Tesco said its Irish revenues surged 16%, to nearly €1.5bn, in the six months to the end of August.

On top of that, Tesco said it will not benefit from the Government's commercial rates waiver.

“Tesco Ireland will not avail of the Government’s Covid-19 commercial rates waiver. Tesco has paid its commercial rates in full for 2020 and is in the process of informing the relevant authorities of its decision,” a company spokesperson said.

Last month, as part of its interim results, Tesco estimated that the Covid crisis will cost it around £725m in its current financial year, which runs to the end of February. That is well in excess of the £585m it received in rates support from the UK government. The company called the support a “gamechanger”.

“While business rates relief was a critical support at a time of significant uncertainty, some of the potential risks we faced are now behind us,” said Tesco’s new group CEO, Cork native Ken Murphy.

“Giving this money back to the public is absolutely the right thing to do by our customers, colleagues and all of our stakeholders,” he said.

Tesco’s group chairman John Allan said the company’s board was in unanimous agreement over repaying the rates relief in the UK.

“We are financially strong enough to be able to return this to the public, and we are conscious of our responsibilities to society,” he said.

“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.”

Tesco said it has not yet determined the accounting treatment for the repayment in its full-year results. Excluding the repayment, the company has guided for retail operating profit to be largely unchanged year-on-year. It said the cash impact of the repayment will be split across two financial years, with the guts of it – around £535m – being repaid this financial year.

Tesco said when the pandemic took hold in March the impact on food retailers was immediate and “potentially disastrous”, resulting in panic buying, severe pressure on supply lines, major safety concerns and the risk of mass absences from work.

On the back of Tesco’s strong first half showing in Ireland, Tesco Ireland CEO Kari Daniels said, last month, that she remained confident of Tesco Ireland performing well despite the Covid impact on households and the economy.

Woodie’s DIY owner Grafton Group is arguably the highest profile company to repay Covid supports in Ireland, to date, repaying more than €2.5m in August which was mainly received in wage supports.

Woodie’s profited from strong pent-up consumer demand after the first lockdown, meaning it no longer qualified for the wage supports.