Tesco ‘plans massive superstore surge’ before proposed restrictions

Published 04th Dec 2009

Tesco is planning scores of new supermarkets across Britain before a proposed clampdown that would restrict its ability to expand.

The country’s largest retailer has lodged nearly double the number of planning applications as its two largest rivals combined, according to data passed to The Times.

The intense planning activity comes as ministers discuss new rules that would limit new store openings by locally dominant chains. One rival accused Tesco of planning a “surge” in new stores before a proposed competition test that would threaten its expansion plans.

Tesco has approximately 76 outstanding planning applications, from convenience stores to hypermarkets. Most have been lodged in the past year. Asda and J Sainsbury have submitted only about 45 between them, excluding extensions.

The competition watchdog has recommended a new test making it harder for supermarkets to open new stores in areas where they are already dominant. The Department for Communities and Local Government is planning its response.

Tesco, the biggest supermarket group in Britain and the market leader in more than 70 per cent of the country’s postcode areas, stands to lose most from such a test and has persistently opposed it.

Supermarkets must at present satisfy a “needs test” and prove that they are responding to unmet demand. The large majority of Tesco’s new stores in recent years have been its convenience format outlets, Tesco Express, which are usually too small to be covered by the test.

A list of Tesco’s planning application suggests that more than 80 per cent of the proposals are for larger stores, including about a dozen applications for huge Tesco Extras.

A Tesco spokesman disputed the data on the list, compiled by a corporate monitoring service, saying that it could not be relied on. “It includes sites where we are no longer pursuing planning permission, others where permission has already been granted and some where our application was lodged many years ago,” he said. Others were below the 10,000 sq ft threshold defined by the competition test.

“We have not increased the volume of planning applications made, we are just getting on as usual with developing our pipeline of stores. Far from preparing for a so-called competition test, we remain strongly opposed to it because we believe it is anti-competitive and bad for consumers.”

He added that the data was also skewed because applications by Tesco’s competitors were often made in the name of the developers.

A retail property source said that the data provided to The Times was cross-checked so that the end user of the property was identified even if it had not developed the land. Tesco declined to state how many outstanding planning applications it had.

Under its chief executive, Sir Terry Leahy, Tesco has opened two million sq ft (180,000 sq m) of space in each of the past two years, more than Sainsbury’s, Morrisons and Asda combined.

It argues that the competition test would impede investment in a well-functioning and competitive market, and much-needed stores would not get built. It points out that some of its developments include regeneration schemes and residential and nonretail space.

The extent of Tesco’s planned domestic expansion has surprised industry insiders because in the past ten years it has largely sought growth abroad and through its smaller stores.Its international business accounts for nearly a third of its £50 billion turn-over and 75 per cent of its new shop space.

Retail property specialists say that the supermarket faces a renewed challenge from Sainsbury’s, which earlier this year raised £432 million from shareholders to accelerate its advance in the North of England and Scotland.

Asda and Sainsbury’s support the introduction of the competition test, although Sainsbury’s has reservations over how it treats extensions to existing stores.

A Sainsbury’s spokeswoman said: “We believe that a competition test for new stores is important because it protects local markets from restricted choice for consumers.” An Asda spokesman said: “Asda supports the introduction of the competition test which we believe is a proportionate measure which will assist the UK economy to further embed, in a sensible way, the foundations for further competition and consumer choice.”

Retailers are awaiting a forthcoming Conservative Green Paper on planning, which will set out Tory proposals. The Conservatives have previously indicated that the “needs test” was adequate.

Trojan horses and building setbacks

— The Big Four supermarket groups — Tesco, Asda, J Sainsbury and Wm Morrison — have grown used to local opposition to new stores

— One of the tactics they are accused of is the use of a front company for filing planning applications, to cut short the time for residents’ groups to organise

— In Barnstaple, Devon, a local food retailer applied to rebuild a store after it had been quietly acquired by Tesco in 2003. It was only in 2008 that the “Trojan horse” application came to light, with Tesco planning a two-floor, 90,000 sq ft (8,000sq m) hypermarket

Source: ' Times '

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