Co-op to keep £66m in rates relief despite 400% rise in profits

The Co-operative group is to repay £15.5m in furlough payments to the government, but will hold on to more than £66m in business rates relief despite announcing a surge in profits during the pandemic.

The mutual, which owns hundreds of grocery stores as well as funeral parlours, legal and insurance services, said pretax profits jumped from £24m to £127m in the year to 2 January.

The group’s total revenues rose 5.5% to £11.5bn as sales at its established food stores rose nearly 7% and its wholesale business, via the Nisa convenience store group, increased 14% as the group benefited from the switch to home cooking during the closure of pubs, cafes, restaurants and schools during the pandemic.

The Co-op also said it carried out 100,920 funerals, 11.4% more than in the previous year as the Covid-19 virus hit home, but revenues for the funeral business were flat because of restrictions on gatherings.

Steve Murrells, the Co-op chief executive, said the pandemic and lockdown restrictions had led people to shop closer to home benefiting its grocery stores.

However, he said costs had also risen because of the need for additional staff and protective equipment as well as increased sickness and absences linked to the virus. He said the additional costs amounted to about £84m just ahead of the £82m provided to the Co-op in government support from furlough and business rates relief.

“Looking ahead, we see significant uncertainty and must continue to exercise financial prudence,” the group said in its financial statement.

“During the last few years, we’ve created a business that is operationally strong, commercially successful and which creates value for our members and their communities,” Murrells said.

But he added that the impact of the pandemic was far from over, with 2021 bringing “new challenges, many of them related to the economic downturn and the challenges communities face.”

The Co-op has pledged to work with the shopworkers trade union Usdaw, to improve hourly pay rates aligned with the independently verified living wage which the group said would mean a pay rise for 33,000 staff.

The group handed out £15m to 4,500 local causes as part of the annual payout from its Local Community Fund as well as £500 each to 150 local causes from additional donations via its members reward scheme.