This article is from The Telegraph’s City Intelligence newsletter. Sign up here for incisive analysis of the day's biggest corporate story from our chief City commentator Ben Marlow.
Supermarket about-turns aren’t easy, not with all these Covid restrictions in place: one-way systems; no going back if you’ve forgotten something; and everyone trying to practice social distancing.
So you can understand why even Tesco is finding it difficult. On the face of it, its decision to pay back £585m of business rates relief is the mother of all reversals.
Allan said he didn’t “remotely feel any guilt over it”. You would think a man who also chairs the UK’s biggest business lobby group, the CBI, wouldn’t be so tone deaf.
So it’s a climbdown, but only of sorts. Even now, the supermarket is clinging to the claim that the tax break was deserved because of additional overheads triggered by Covid, ignoring the fact that those costs were more than offset by the sales bonanza that grocers have enjoyed during the pandemic.
No one would argue that Covid was “an unprecedented situation” or that “the impact was immediate”. But other than panic buying, the challenges that Tesco points to - supply chain pressures, safety concerns, and employee absences - were common to most big businesses
And other recipients of the Treasury tax break were forced to close their doors while the grocers continued trading.
It is also a stretch to suggest that the supermarkets’ ability “to feed the nation” was somehow in jeopardy. A brief shortage of baked beans and toilet paper does not constitute a hunger crisis.
Besides, that uncertainty quickly passed and it wasn’t long before sales were booming, at which point the business rates relief should have been returned, not nine months later after a political firestorm.
Perhaps this is an attempt to back down graciously but recycling the same false arguments isn’t the way to do it. The proof is in the pudding anyway so why doesn't Tesco just admit it got it wrong?
Tesco’s rivals will be fuming that it has broken ranks, but it doesn’t necessarily follow that the rest of the sector has to do the same.
The other quoted supermarkets - Sainsbury’s and Morrisons - will be under huge pressure to return the Treasury’s handout - but those in private hands may be prepared to wear their pariah status.
Will the publicity-shy Issa brothers, who recently took over Asda, care what the public thinks if the takings at the tills hold up? As for Aldi and Lidl, what’s German for “I’m alright Jack”?
Still, while Allan is talking about “responsibilities to society” it is worth pointing out some simple maths. If the supermarkets handed back the £2bn they collectively received in handouts, that would fund 62m courses of the Pfizer vaccine, so only 5m shy of the total UK population.
Are business rates and the vaccine roll-out related? Well, actually yes. The pandemic means everything is related, which isn’t a bad definition of society more widely.
The fallout from this crisis will widen the divide between the ‘haves’ and ‘have-nots’. But this dynamic is already playing out in the business world. The business ‘haves’ need to develop a far better understanding of fairness.
The supermarkets have tried to come up with clever arguments for why they deserve this tax break and were right to exploit the loophole. But businesses need to recognise they have a duty to society as well as shareholders, and become more attuned to how their behaviour will be perceived by the wider public.
If not, the backlash will be vicious. Just ask the banks.
The price is (finally) right
Talk about value for money. A £300m-plus pay day for advisers and look where Canada’s GardaWorld has ended up with its bid for G4S. A three-month pursuit at a silly low-ball price that everyone, except those with their noses in the trough it would seem, could see was going to go nowhere unless it produced a serious offer.
Even as the 46-day takeover timetable drew to a close, GardaWorld’s Stephan Cretier was going on about how he hadn’t seen “a single piece of evidence” to suggest that 190p “is anything other than full and fair.”
How about the fact that only 0.17pc of investors had accepted it? Or, G4S’s share price, which has traded above the 200p mark, and as high as 230p, since Gardaworld tabled a formal bid at the end of September.
And now the inevitable: a sweetened “final cash offer” with the clock about to run out. Given that G4S’s share price hasn’t traded at those levels since September, 2018, 235p from Gardaworld should be enough to swing it, unless there’s a counter-bid from American outfit Allied Universal.
But if you can afford to throw around obscene sums on bankers and lawyers, you should expect shareholders to hold out for a proper price.
Hardly breaking the bank
A £50m payment into the Arcadia pension scheme from Tina Green, wife of Sir Philip, will go some way to reassuring members, but don’t be fooled. It is just a previously agreed cash injection being brought forward. The Greens can do better.