The boss of the Co-operative Group has defended keeping £65 million of taxpayer support despite its profits rising 429 per cent last year and increasing bonuses for bosses.
The UK’s largest mutual which champions its “truly ethical trading” policies, said that it would hand back £15.5 million of furlough cash but would not repay business rates relief.
That decision has rankled with rival retailers, who highlighted the Co-op’s fivefold increase in pre-tax profit to £127 million in the year to January 2. The grocer to funeral business, which is the sixth-largest food retailer in the UK, reported total revenues had also risen 5.5 per cent to £11.5 billion from £10.9 billion previously.
Steve Murrells, chief executive, justified keeping the rates relief by saying it had faced £84 million of additional Covid costs during the year, marginally higher than the £82 million total government support it had received, including providing PPE, sick pay and staff bonuses.
Murrells said the decision to keep the relief helped it afford the actions taken to support communities during the crisis which he said “plays exactly to the values and ethics of our social values”.
The Co-op boss highlighted the £12 million it had shared with charities during the crisis, although his grocery peers were quick to say that sizeable donations to food banks had been made by rivals. One senior rival branded the Co-op’s arguments as “deluded”.
The decision puts it at odds with its competitors. Tesco, Sainsbury’s, Asda, Morrisons, Lidl and Aldi have all pledged to repay £2 billion of business rates relief. However, Waitrose, Marks & Spencer and Iceland have also refused to pay back the support.
Catherine Shuttleworth, analyst at CitySavvy, said: “The Co-op are constantly ramming down our throats about how they are different from listed rivals, but it seems having shareholders is the only way to ensure companies behave in the interests of the country.”
The Co-op is also increasing bonuses for bosses and 8,000 colleagues from £7.3 million to £8.4 million, although a spokesman emphasised that government support had been removed from the calculations when hitting performance targets.
The traditional Co-op members dividend was scrapped in 2014 after an accounting scandal. Murrells said that restoring the dividend was not top of the company’s agenda.
“This wasn’t an affordability decision, it’s about what’s right for The Co-op”. Those were the words of Steve Murrells yesterday as the Co-op boss attempted to defend the retailer’s decision to not repay taxpayer support.
Try as it might, the Co-op would have been hard pressed to plead poverty as its balance sheet is in a better situation than it has been for the past eight years. Murrells’s argument that the Co-op needs the cash because it can’t tap equity markets like its listed rivals is a spurious one, it doesn’t need to right now. Its profits have quadrupled in the past year, in contrast to Morrisons and Sainsbury’s, which suffered a halving in profits and still handed back their rates relief.
Sure, the Co-op faced £84 million of costs related to covid — just £2 million more than the total amount it received from the government — but every other supermarket chain also faced hundreds of millions of pounds of steep costs relating to sick pay, PPE and hiring more staff.
The Co-op says its network of 2,600 convenience stores meant making its stores covid-secure was more expensive because it couldn’t do a cookie-cutter approach to social distancing. But that’s downplaying the advantage it had from consumers shopping closer to home during lockdowns.
It also tries to claim its different to other grocers because its fledgling digital business missed out on the pandemic’s online sales surge. But this argument doesn’t wash either because Aldi’s online sales of wine cases are even smaller and Lidl doesn’t have any online sales and both the discounters paid back their rates relief.
The grocers who have paid back rates relief have said that they realised it was the right thing to help the country as they have been able to continue to trade while others haven’t. For the Co-op, which claims so loudly to care about social issues, it has utterly failed to make a compelling argument about why it thinks keeping the taxpayer cash is the right and ethical thing to do.