Between 19 – 24 March 2020, we conducted a survey for thought leaders in the retail, hospitality and leisure sector, in order to share the data and help others facing these unprecedented times.
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80% of our respondents are headquartered in London. 50% of responses received were from businesses with in excess of 250 employees.
The top themes which derived from the survey are listed below, alongside information produced by us to hopefully provide some clarity and guidance.
The Collective by Lewis Silkin is here for you. We know that the retail, hospitality and leisure community faces many urgent and unique challenges over the weeks and months ahead. We want to play our part in helping you, your business and your industry move past them. With questions and queries wide-ranging, we are here to help provide answers, to act as a sounding board for the decisions you’re planning to make and to help you make the key decisions that will protect your business and your communities in the weeks ahead.
As always, we are available at any time if you need further support. Please contact the.collective@lewissilkin.com, and visit our Covid19 hub.
If you would like to know more about The Collective by Lewis Silkin, please check out our webpage here.
As always, we would be delighted to promote Collective members – please get in touch if you wish to share interesting content on our site.
Supply chain and supplier agreements
The true extent of supply chain issues is unfortunately yet to be seen, and out those surveyed, 56% had already experienced issues, with another 20% expecting to do so within 2 weeks.
The effects of COVID-19 are being felt at all levels of the retail supply chain. China is beginning to reopen factories, but disruption persists as production levels are anticipated to recover gradually. As the world’s biggest exporter of textiles and clothing the disruption in China has a ripple effect across the industry. Estimates place delays in delivery between one to three months, putting seasonal releases at a particular risk.
Brands with a diversified supply chain and a strong online presence are proving more resilient in the face of the outbreak. However, many retailers are in a position that puts obligations in business to consumer contracts at risk of not being met.
The main risks we foresee for UK vendors is the ability to adequately stock stores and fulfil deliveries on time because of disrupted logistics and supply chains. Whilst online sales are moderating the damage caused by falling foot-traffic, they also present a greater cancellation risk if delivery becomes subject to significant delays.
As businesses implement their continuity plans, we have been advising many on their supplier agreements, which may need to be renegotiated to avoid potential litigation for non-performance.
If, you, like 68% of our respondents, are currently seeking to renegotiate supplier agreements and commercial contracts, we have provided a breakdown in this guide of issues which we are seeing daily, alongside our top 10 tips to help you.
Remember it is key to engage not only with your staff, supply chain and logistics providers, but also with your customers. Keep the dialogue open, be fair and keep them onside.
Bricks and mortar closures
It won’t come as much of a surprise that 64% of those surveyed had already closed retail stores, hotels or leisure facilities. Although most were encouraged by Chancellor Rishi Sunak’s relief measures, 56% believed more needed to be done to help.
The reality of what the sector is now faced with and the difficult challenges which lie ahead for landlords and operators is stark. With the March quarter date having now arrived, many operators find themselves with little or no revenue coming in. Whilst the government’s agreement to extend the moratorium on lease forfeiture for 3 months (so as to prevent landlords evicting a tenant for non-payment of rent during this period) provides a short period of grace, operators are desperately trying to find solutions which will help them pay their invoices and retain their staff.
If you own or occupy commercial premises on a leasehold basis, please reference this guide which details measures you should take.
Disputes
Fortunately, 75% of those surveyed did not anticipate potential litigation, as a result of non-performance of their supplier/customer agreements. However, with the government’s mandatory restrictions to stay at home and shut up shop, many contractual obligations are likely to be even more difficult to meet.
Those businesses impacted by the government instructions are much more likely to be able to bring contracts to an end or suspend performance of contractual obligations without incurring liability for alleged breach of contract by relying on contractual force majeure clauses or the common law doctrine of frustration.
But these are complicated issues and is this the right thing to do? Long-term relationships will very much be at the heart of any decision.
68% of our respondents said that they were carefully looking at all of their contractual obligations to fully understand any risks.
Whether relief for force majeure or frustration is available to you does require a careful assessment of the language in the contract and the law. We have created this helpful note which explains the law in a little more detail as well as these flowchart diagrams which will help you make an assessment as to whether you can end your contract or not.
Marketing
With some products in high demand, and the situation changing daily, advertisers are keen to diversify their marketing efforts and explore new ways of reaching consumers. 80% of those surveyed told us they are increasing their social media presence. 65% will be looking at though leadership initiatives to continue to engage with their contact base. Surprisingly, only 25% are relying on price reductions, with preference for increased use of affiliate marketing and online retargeting.
Many advertisers will want to acknowledge COVID-19 in their marketing and external-facing comms in a responsible and authentic way.
Some will need to communicate updates and guidance to consumers on a regular basis, such as those in the travel and hospitality sectors. Others, including makers and retailers of hand sanitisers and facemasks, but also cupboard basics such as tinned goods and loo paper, may be tempted to take advantage of the unique ‘opportunities’ it presents.
But is it legally OK to do so? Please see our guide for advertisers with helpful tips on advertising your products and services during this time.
Employment and Immigration
The government has brought in unprecedented measures to protect the workforce, providing some relief to those most affected. However, 32% of our respondents still predicted that they will need to make redundancies.
We know that people are the heart of any retail, hospitality or leisure business. These are people heavy sectors. We have prepared a comprehensive set of FAQs for employers setting out guidance on all the main questions we are being asked, including everything from “Do we have to pay employees who are off sick with diagnosed Coronavirus?” to “Can we lay off employees or put them on short-time working if demand decreases in the following situations?”.
Like many in the sector, if your business intends to use the government’s ‘furloughing’ measures, our breakdown of the process can be found here. This article summarises what we know so far, what we think are the key unanswered questions and our initial views on the implications for employers.
It is too early to assess the full implications of the spread of COVID-19 for your foreign nationals working in the UK. However, 45% of those surveyed said that they would need to renew non-EEA worker visas in the coming months and 15% were unsure how this will work in practice given the circumstances.
The Home Office has relaxed restrictions, until 31 May, on being able to swap from one immigration category to another without having to return abroad.
People with visas expiring between 24 January 2020 and 30 May 2020 are now able to contact the Home Office to request an extension of their stay until 31 May 2020, provided the reason they can’t leave is due to travel restrictions or self-isolation caused by COVID-19.
From logistical considerations to Tier 2 and prevention of illegal working requirements, our helpful guide on immigration implications for UK employers will steer you in the right direction and hopefully answer any questions you have.
IR35 and Gender Pay Gap Reporting
The majority (53% in fact) of our respondents were pleased with the delay of IR35. Just 2 weeks out from the implementation date, only 52% of respondents felt they were prepared for its implementation.
Delaying its implementation is one of the measures the government has brought forward to help businesses and individuals in the light of the coronavirus pandemic. The proposed IR35 reforms will now be deferred for one year, taking effect on 6 April 2021 instead of 6 April 2020 as previously planned.
The government has previously resisted all pressure to delay or amend the proposals. It is clear, however, that this is a deferral of the reforms rather than an abandonment, and it remains committed to introducing them. The postponement will come as an enormous relief to businesses who were struggling to get ready for this significant change to employment tax at the same time as dealing with the issues thrown up by the fast-changing coronavirus situation.
But what should businesses and contractors do now? Our note explains what you should be doing in light of the delay and how to be well prepared for next April.
In addition to the delay of IR35, the government requirement for employers with 250 or more employees to publish gender pay gap reports has been suspended for this year. Learn more here.
Related Item(s): Business continuity, Retail, Hospitality & Leisure