Closed not closed: Coronavirus

The UK government has issued confusing advice around actions to take to reduce the spread of Coronavirus. The advice is to avoid social contact and non-essential travel, to work from home and avoid pubs, restaurants and theatres. But there is no forced closure of establishments, public transport continues to operate, people can still move freely and schools remain open.

These contrast with the more severe measures in Italy and France. But perhaps more severe measures will follow in the UK and these initial measures are designed to get the public ready for what will follow. We are at stage 1 and it’s probably only a matter of time before we move to the second stage.

For now, many businesses are in limbo. The government has made some promises to help out small businesses with statutory sick payments, business rates and to provide loans but this is nowhere near enough to prevent businesses going bust. It’s one thing to help them reduce their outgoings, but if they don’t have the incomings because customers are staying away, then it’s inadequate.

Is this force majeure yet?

Because this isn’t an official lockdown (yet), does this count as an event beyond a business’s control so as to trigger the “force majeure” provision in their contracts? Well we’re not at stage 2 lockdown yet but even this stage 1 advice is an event beyond the control of ordinary businesses. Some provisions refer to epidemic or pandemic, which this is. But will this cover precautionary isolation of customers rather than infected staff? Maybe.

Chase payments & restrict outgoings

Cash is king and never more so than in a crisis. Call in your debts as soon as possible. Work out how you can reduce costs. Can you take a rent holiday on your business lease? The more money you have in the business, the longer you can weather this storm.

Will insurance cover help?

The Association of British Insurers has warned that most business don’t have the correct insurance to cover them. Standard business interruption cover doesn’t include forced closure by governments. This suggests they might be covered by stage 1 but not stage 2. But the statement continues that such insurance typically covers physical damage at the property. So again, this isn’t covered. It sounds like your insurance cover – if you have it – won’t help. You should check your insurance cover asap.

Can you terminate?

If things are really bad, maybe you can terminate your contracts. There’s no point in continuing to pay for goods or services that you can’t use or resell. So check your termination clause. Can you terminate for convenience? How much notice must you give?

Have questions? Contact me: 020 7467 8742 frank.jennings@wallace.co.uk

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