Co-op under attack for keeping business rates relief

The Co-operative Group has come under attack from supermarket rivals for its decision to keep £66m of business rates relief it received during the pandemic despite posting a leap in profits and paying out executive bonuses.

The mutual, which takes pride in its “truly ethical trading” credentials, will award bonuses to senior managers.

One top supermarket executive said they were “flabbergasted” by Co-op’s decision to not repay the cash and accused the retailer of “nuclear-powered hypocrisy”.

They added: “From a company that has spent the last decade thrusting their values down anyone’s throat and taking the moral high ground, to look their customers square in the eye and say ‘you can whistle for your money back’ and ‘no, it doesn’t contradict our values’, it’s nuclear-powered, ocean-going hypocrisy.”

The chief executive of another retailer that returned the rates relief said: “It would’ve been very helpful to keep it, but it’s not our money – it’s taxpayers’.”

The mutual, which also has funeral, legal services and pharmacy divisions, reported sales of £11.5bn for the year to Jan 2, £600m higher than in 2019.

Pre-tax profits at the group rose to £127m from £24m, while underlying operating profits for its food business jumped from £283m to £350m.

The Co-op said it would repay £15.5m in furlough support claimed through the Coronavirus Job Retention Scheme, but added that it had been forced to spend £84m to cover costs directly associated with the pandemic such as PPE for staff.

Steve Murrells, chief executive of the group, said: “What the board has done is completely in line with our values and ethics. The decision was completely supported by the members’ council, we haven’t paid a dividend and we don’t have the same access to capital markets as others might.”

More than £2bn has been handed back to the Government by 14 major retailers, including the four biggest supermarkets, which have enjoyed a sales boom over the past year.

Waitrose, Marks & Spencer and Iceland have also resisted pressure to hand back the relief. Iceland said earlier this year that it had used some of the funds to buy out its foreign investor. 

Robert Hayton, UK president of property adviser Altus Group, said “some parts of the retail sector thrived during the pandemic and the rates holiday was the icing on an already very sweet cake”.

In September, Co-op signed a 15-year sponsorship agreement for the naming rights to an arena in Manchester in a deal reported to be worth about £100m. A source close to the company said it was worth “significantly less”.

Mr Murrells said that bonuses for the company’s executives were being paid after store staff were rewarded with £25m, adding that the money was not coming from the rates relief pot. He took a pay cut at the peak of the crisis. 

The three-month extension to the relief in England, which started on 1 April, provides a further £758m tax windfall to essential retailers. However, relief worth about £490m has already been turned down. 

Co-op is opting out of a three-month extension of the relief. The business rates holiday covers the 12 months to the end of March 2021. 

Nick Crofts, who is the president of Co-op’s national members’ council, said members were fully supportive of the decision to hold onto the relief. 

Allan Leighton, group chairman, said the supermarket chain had played a “vital and unique role in feeding and caring for the nation” during the pandemic.

“We welcomed money from the Government on the basis that it was not a loan and we would not need to pay it back – and we took business decisions accordingly.”

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