A late newsflash: Supermarket chain Morrisons has just announced that it is also waiving its business rates relief.

Nearly 12 hours after Tesco’s decision surprised the sector, Morrisons has told the City that has been “considering” the issue for some time, and was waiting for more clarity about the costs and duration of the pandemic.

But it’s now committed to paying business rates in full, at a cost of £274m.

Morrisosn also says it expects to incur £270m of direct costs from the pandemic, which is £40m than previously forecast.

The supermarket chain says:

For some time Morrisons has been considering the implications of the Government’s decision not to collect business rates this year, and we had planned to make our decision once the full cost and duration of COVID-19 had become more clear. However, we have now brought forward this decision and are committing to pay business rates for the coronavirus period in full. The total amount to be paid will be £274m, of which £230m relates to 2020/21.

Due to the impact of the second lockdown and other tier restrictions, we now expect direct COVID-19 costs to be around £270m, c.£40m more than our estimate at our 2020/21 interim results, and significantly higher than the £230m in-year business rates relief.

The company also points out that profit has been “significantly impacted throughout the year by the extra costs of doing business during the pandemic”.

Morrisons is also paying a special dividend of 4.00p per share to shareholders. This relates to the second half of the 2019-20 financial year (before the pandemic), and had been deferred.

David Potts, chief executive, said:

“We are grateful for the Government’s swift action at the start of the pandemic which enabled the whole sector to face squarely into the challenges and disruption caused by COVID-19.

Throughout this difficult period Morrisons has done its best work to look after our colleagues, our customers and key workers, to feed the nation, to protect both the vulnerable and our smaller suppliers and to play a full and leading role in meeting the enormous challenges that the COVID-19 pandemic brought. I’m exceptionally proud of the way that the whole business has responded.”

Here’s some snap reaction:

Time to wrap up.

Tesco has bowed to pressure and decided to repay £585m of business rates relief granted in the UK since the pandemic started. The supermarket chain said it was the ‘right thing to do’, as the economic risks are receding

The move follow criticism that Tesco didn’t need the money as it was paying out dividends, and puts other supermarkets in the spotlight to follow suit.

Scotland’s government welcomed the move, saying it would help support struggling businesses. The pub and brewing industry argued they should receive the money to help them through the crisis.

On the Arcadia crisis, the UK government has asked the Insolvency Service to examine the conduct of directors at Sir Philip Green’s fashion empire. led to its collapse, and problems for the group’s pension fund.

Business secretary Alok Sharma wrote:

“If you decide that there are grounds for an investigation, I would ask that it looks not only at the conduct of directors immediately prior to and at insolvency, but also whether any action by directors has caused detriment to creditors or to the pension schemes.”

The collapsed group’s owner, Lady Tina Green, has said she’ll accelerate her outstanding £50m payment into its pension scheme.

Shops across England reopened after the national lockdown today, prompting queues outside retailers such as Primark.

Debenhams kicked off its closing down sale - its website struggled to cope with the rush.

Fashion retailer Bonmarché fell into administration for the second time in a year as the Covid crisis among high street retailers continues to mount.

On the economic front, fewer new jobs were created last month than expected, according to the ADP Payroll report. Analysts say it shows America’s economy is slowing, and needs another stimulus package.

In the markets, the pound has dropped amid Brexit concerns, while the FTSE 100 index has rallied amid economic optimism, after the UK became the first country to approve Pfizer and BioNtech’s COVID-19 vaccine.

Goodnight. GW

The pound’s weakness, the rising oil price, and some economic optimism, has helped to push stocks up in London tonight.

The FTSE 100 index has jumped 78 points to close at 6463, up 1.2% today. That’s its highest close since 8th June.

Mining groups and oil companies lead the rally, along with multinationals like pharmaceuticals firm Hikma and tobacco maker Imperial Brands (whose overseas earnings are worth more when sterling falls).

London Stock Exchange was itself the top riser, up 9.5%, after reports that the European Union was set to approve its $27 billion takeover of data firm Refinitiv.

Germany’s DAX lost 0.5%, though, while the French CAC was flat.

David Madden of CMC Markets sums up the day:

The FTSE 100 is outperforming its Continental counterparts thanks to a rally in pharma, commodity and banking stocks. BP (+4.7%) and Royal Dutch Shell (+3.8%) are up on the day on the back of the rebound in the underlying oil market.

BHP Group (+5.6%), Anglo American (+2.1%) and Rio Tinto (+4.8%) are the biggest rises in the mining sector. AstraZeneca (+1.7%) and GlaxoSmithKline (+0.9%) are higher on the back of the optimism in relation to the Pfizer-BioNTech vaccine being granted authorisation in the UK.

However, UK-focused firms like housebuilders fell, as did supermarkets and retailers.

Sainsbury dropped 2.8%, Morrison’s fell 2.2% and B&M lost 2.1%, following Tesco’s decision to repay its business rates relief.

The smaller FTSE 250 index, which is a better barometer of the UK economy, only gained 0.2%.

Our economics editor Larry Elliott has analysed how Britain’s weakness for short-term thinking, financial engineering, and debt led to this week’s retail crisis.

Green bought Arcadia in 2002 – mostly with borrowed money – cut costs aggressively to raise profits, refinanced on better terms, and extracted a whopping £1.2bn dividend for the company’s biggest shareholder: his wife.

In the early 2000s, this approach was all the rage. Load up on private equity debt, pare investment to the bare minimum, increase short-term profits, and top things off with a bit of financial engineering. With the City of London geared up for these sort of transactions, why waste time and effort innovating and planning for the long term? Green certainly had an eye for a deal; what he lacked was the nous to reinvest some of the profits into building a company strong enough to see off more nimble rivals. Early on, it came from Primark and Zara, but more recently from the pure online retailers, which paid much lower rent and business rates and were even better at cutting costs.

Larry also warns that it would be brave to assume that there aren’t more Arcadias (or Debenhams, hamstrung by short-termist private equity owners) heading for trouble:

Corporate debt had been rising for eight years ahead of the pandemic, much of it used to keep shareholders sweet. After the US, the UK was one of the biggest users of share buybacks in 2019, according to the Bank for International Settlements. There is certainly no evidence that rising corporate debt has been funding an investment boom. The loans that the chancellor, Rishi Sunak, has provided have saved many retailers from bankruptcy but the crunch will come when that debt has to be repaid.

Lady Christina Green (the ultimate owner of Arcadia) has said she will bring forward the outstanding £50m payment she pledged to put into the collapsed retailer’s pension scheme.

A statement on behalf of Sir Philip Green’s wife says the payment will be made in the next seven to ten days - it had been due next September.

This will complete the £100m she committed to last year (two payments of £25m each have already been made), as part of the deficit reduction plan agreed in 2019, as part of the rescue restructuring of Arcadia.

So, while this money is being paid early, this is not a pledge of additional money from the Green family to tackle the pension scheme deficit.

A statement says:

“Last year Lady Green committed to paying £100m in to the company’s pension scheme in 3 instalments.

Two instalments of the amount of £25m each as agreed has already been paid, the third and final instalment of £50m was not due to be paid until September 2021.

Lady Green is going to bring this payment forward to be paid in the next 7/10 days to complete the £100m commitment of payment.”

The Scottish Government have thanked Tesco for deciding to hand back their business rate relief (illustrating the value of being the first to do the right thing)

Finance Secretary Kate Forbes estimates that it could be worth £60m to the devolved administration. It will be used to support businesses hit hardest hit by the pandemic, she says.

[Scotland announced a one-year business rate relief holiday for retail, hospitality and leisure firms in March, a day after Rishi Sunak’s action in England].

Forbes says:

“This is a public spirited announcement from Tesco who, along with other essential retailers, have played an important role in Scotland’s response to the pandemic. I thank them for it.

“At the beginning of the pandemic the effects on businesses were uncertain and Tesco acknowledge that the rates relief provided by the Scottish Government gave them the confidence to retain staff and ensure essential supplies were available to customers.

“Now the situation has evolved, and Tesco’s business is proving to be resilient, I am pleased that the company are willing and able to refund the public support provided, which we estimate to be in the region of £60 million.

“We will ensure this money is fully spent on those who have been hardest hit during Scotland’s recovery from Covid. If other businesses find themselves in the same position, I can assure them that every penny of support returned will be reinvested in supporting Scotland’s hardest hit businesses, alongside investment in our communities and our economy.”

Over in America, private sector job creation has slowed - a sign that the US economy may be cooling.

ADP, the payroll operator, says that US private sector companies created 307,000 jobs in November, down from 365,000 in October.

Economists had expected a rise to 410,000, so this indicates that the surge in Covid-19 infections and deaths could be slowing activity.

This may indicate that the official US jobs report, the Non-Farm Payroll, could be disappointing (it’s due on Friday).

And the broader message from the ADP is clear -- millions of jobs have still not been recovered since the pandemic hit the US this year.

The UK government has asked the Insolvency Service to examine the conduct of the directors of Arcadia, which collapsed into administration on Monday night.

Business secretary Alok Sharma has written to the Insolvency Service, asking them to “rigorously and expeditiously” review the report on the conduct of Arcadia’s directors, which the administrators [Deloitte] must produce within three months.

Sharma also asks that if the Insolvency Service launches an investigation, it should examine whether Arcadia’s directors caused damage to its pension scheme (which has a deficit of up to £350m).

Sharma writes:

Given the significance of this case and its implications for thousands of suppliers, pensioners and employees, I would be grateful if you would review their report rigorously and expeditiously as soon as you receive it.

If you decide that there are grounds for an investigation, I would ask that it looks not only at the conduct of directors immediately prior to and at insolvency, but also at whether any action by directors has caused detriment to creditors or to the pension scheme.

There is joy in heaven over one sinner who repents, says my colleague Nils Pratley....

There will also be astonishment on earth that Tesco is handing back to the Treasury its undeserved £585m pandemic freebie on business rates. The chances of a U-turn had seemed remote.

But there’s also time for the other sinners to change their ways, and you don’t want to be the last one seeking redemption.

As Nils writes:

The right thing for Tesco to do is also the right thing for Sainsbury’s, Morrisons, Asda, Aldi and Lidl and so on. Indeed, the most gratuitously underserved handout was received by B&M. The discount chain sells a few lines of food, so it qualified as an essential retailer and stayed open, but its shelves are also filled with toys, games, furniture, stationery and rugs. With most of its non-food competitors ruled offside, B&M had the freedom of the inessential pitch.

Earlier this month, B&M reported a 30% improvement in like-for-like sales in a six-month period and a near-doubling of top-line profits to £296m. There was never a reason for Sunak to give B&M £38m-worth of relief on rates – in pub-land, his error must look obscene.

B&M and the others have a simple choice. They can do as Tesco has done belatedly – thank the chancellor for his kind support in a moment of economic uncertainty and say that, happily, his gift turns out not to have been needed. Or they can explain why they’re greedier than Tesco.

The market leader will win huge credit for moving first. But second place is still up for grabs, and limping in last is not the position to be. Hurry up.

Britain’s brewing industry is urging the government to redistribute Tesco’s £585m business rates relief to pubs and breweries.

The Society of Independent Brewers (SIBA) points out that it would be worth £14,000 to each of the UK’s 40,000 pubs and 2,000 breweries. This could offset some of the lost sales due to tier 2 and 3 restrictions over the Christmas period - usually a bumper time for the sector.

It would also make up for the £1,000 grant offered to wet-led pubs this week, which SIBA calls “derisory” (and Labour’s Keir Starmer dubbed ‘small beer’)

James Calder, SIBAs Chief Executive said:

“Supermarkets have thrived during this crisis, but the UK’s pubs and brewers, which are core to their communities have been left behind. Other supermarkets should follow the good example set by Tesco’s, return the relief they didn’t need and the Government should use the money wisely to give us a chance to see in the New Year.”

“Small breweries have not had access to Business Rates holidays or substantial grants, their sales are at rock-bottom and they are running on empty. Only recently has Northern Ireland announced plans to extend Business Rates holidays to small breweries, and the Treasury should follow their lead with that, and more realistic grants.”

The fashion retailer Bonmarché has become the UK’s third retail casualty of the week - and it’s only Wednesday morning.

My colleague Mark Sweney has the details:

Bonmarché has fallen into administration for the second time in a year as the crisis among high street retailers continues to mount.

The Wakefield-based retailer, which was only bought out of administration by the retail mogul Philip Day in February, sells fashion for women over 50 and has more than 225 shops and 1,500 staff.

RSM, which has been appointed as administrator, said that “no redundancies or store closures have been made on appointment”.

Debenham’s website has also been flooded with demand this morning, as shoppers try to take advantage of its closing down firesale.

The stricken retailer has been forced to set up a virtual queue to handle the rush.

It was offering a 12 minute wait... (some have reported up to an hour).

... but it now seems to have crashed.

Many customers are reporting problems once they were allowed into the sale too.

Several say they were unable to buy items, and were put back in the queue instead!

England’s high streets returned to business slowly and tentatively before dawn this morning, my colleague Sarah Butler reports

There were queues outside some Primark stores as they became some of the first to open their doors at 7am.

She’s on Oxford Street, where around 20 shoppers had gathered for the reopening.

Sarah reports:

Standing in the queue outside the cut-price fashion store, which was still bringing in trollies full of Primark stock after the doors opened, Gabriella Abrile, 21, said “I’m so excited. It’s a very good store. I’m here to buy gifts.”

Several other shoppers said they were popping in on their way to work. Tracey Banks, 57, said she had been keen to get back into stores as “I’m old, I like to touch and feel things. I don’t like to just look at a picture.

“I’m going to get some Christmas pyjamas to make sure I get them before the mayhem starts. I’m surprised there is only a little queue. I expected it to be much bigger,” she said.

Russ Mould of stockbrokers AJ Bell says Tesco’s decision to ‘do the right thing’ comes at a cost -- but at least it may get some credit for moving first.

The decision by Tesco to pay back business rates relief represents a significant U-turn and will crank up the pressure on its supermarket rivals to follow suit.

“This gesture comes at a fairly sizeable cost – so it can’t be dismissed as meaningless – and it may well be that the boardrooms of its peer group are cursing the move. After all, if they follow suit, unlike Tesco they won’t be able to claim the brownie points for going first.

“Previously the grocers had argued they were entitled to take advantage of this tax break, despite being able to operate throughout the pandemic, due to all the extra costs they incurred and the pressures they faced in feeding the nation.

“Tesco will argue that today’s decision is less a reflection of a change of heart and more a story of a change of circumstances as the backdrop has stabilised.

“It may be that the company is seeking to pre-empt any action from a cash-strapped Government – which has seen supermarkets book big profits and in some cases increase dividends to shareholders despite the impact of Covid-19.

Mould also points out that supermarkets weren’t the only companies to take the business relief, and keep trading.

Discount retailer B&M, for example, recently declared a special dividend after a lockdown sales boost.

Kingfisher, which owns DIY chain B&Q, also saw a jump in profits. However, it didn’t pay an interim dividend and decided to return £23m of furlough pay to the government.

The business rates holiday was set by the UK Treasury back in the early weeks of the crisis, to shore up the finances of stricken retailers, hospitality firms and leisure businesses as the pandemic gripped the economy.

No-one would claim that supermarkets have had an easy year. But by paying out dividends, they’ve shown they’re in a far better position than pubs or restaurants, say, who lost sales due to lockdowns and tiered restrictions.

Back in October, my colleague Nils Pratley explained succinctly why Tesco should repay its £585m business rates relief.

Business rates are a property-based tax. In spirit at least, the chancellor was trying to help those consumer-facing businesses whose premises were shut and who suffered a collapse in trade. Neither applied at Tesco. Its stores remained open and revenues were up by 7.7% in the UK, the strongest performance in years.

The real fault lies with [chancellor Rishi] Sunak and the Treasury, obviously. There was no need to give rates relief to supermarkets, whose incentive to “feed the nation”, as they like to put it, was extra sales to cover extra costs. Yes, the logistics response was impressively slick, but the stores weren’t giving the goods away for free.

And supermarkets aren’t forced to accept the money, Nils adds:

Refusing a freebie would have upset shareholders, it hardly needs saying. But, as things stand, Tesco isn’t offering a serious defence of why it is clinging to a large and undeserved financial benefit that is, in effect, the product of sloppy policymaking by a Treasury team operating under the pressure of a pandemic.

Morrisons’ stance last month was the same as Tesco’s, so there’s no great surprise here. And, to repeat, it should fall to Sunak to explain why he wasn’t smarter with the design of his rates relief. But in the world of hospitality and events – and many other industries still in the eye of the storm – the Treasury’s gift to big supermarket chains must look obscene.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Some breaking news to start the morning - Tesco, UK’s largest supermarket chain, is repaying £585m of business rates relief it received during the coronavirus pandemic.

Tesco announced the move this morning, following criticism that the supermarkets didn’t need the help - as they have enjoyed a sales boost during the crisis, and kept paying dividends to investors.

Tesco says it is “immensely grateful” for the financial and policy support provided by the governments of the UK - including the 12-month break on business rates granted to all retailers.

This was a game-changer and allowed us to ensure customers got access to the essentials they needed.

The chain says it faced “significant uncertainty” earlier this year -- panic buying, severe pressure on supply lines, major safety concerns and the risk of mass absences from work.

The group also points out that the costs of Covid-19 have been considerable:

Every penny of the rates relief we have received has been spent on our response to the pandemic. Our latest estimate at our Interim Results in October was that COVID would cost Tesco c.£725m this year – well in excess of the £585m rates relief received.

But having kept trading through the pandemic, Tesco has now concluded that it can return this saving.

Ten months into the pandemic, our business has proven resilient in the most challenging of circumstances. While all businesses have been impacted – many severely so – we have been able to continue trading throughout, serving many millions of customers every day and although uncertainties still exist, some of the potential risks faced earlier in the year are now behind us. We remain absolutely committed to doing the right thing by our customers, colleagues and all our stakeholders.

We are therefore announcing that we will return to the public the business rates relief received in full. We will work with the UK Government and Devolved Administrations on the best means of doing that.

This move will put pressure on other supermarkets to follow suit.

Altus Group, a property adviser, estimated last month that Tesco, Sainsbury’s, Asda, Morrison, Aldi and Lidl – will save a combined £1.9bn in combined business rates relief.

The news comes as England’s new three tier system comes into effect this morning, meaning non-essential shops can reopen - just in time for the Christmas rush.

Gyms, hairdressers and other personal care businesses can also resume, with the formal instruction to stay at home coming to an end. The “rule of six” will again apply for outdoor gatherings in all areas

The agenda

• 10am GMT: Eurozone unemployment figures for October
• 1.15pm GMT: US ADP survey of private sector payrolls