COVID-19: How will further business closures affect the food, retail and leisure sectors?

Following the government’s announcement on 23 March of new measures to close more businesses, we look at the key changes and practical issues to be aware of

25 March 2020

New business closures

On 23 March the government announced a significant expansion of the types of businesses that must now close to help manage the COVID-19 pandemic. This comes further to emergency legislation enacted last weekend, which required the closure of many food and drink businesses and leisure venues from 21 March. These included restaurants, cafes, pubs, cinemas, theatres and gyms.

Further to the Prime Minister’s announcement on Monday, in guidance issued yesterday and today the government has added the following to the list of businesses that must now close:

  • Save for a very limited range of exceptions, all retail stores, including clothing and electronics stores, hairdressers, beauty salons, shopping centres and outdoor and indoor markets (although market stalls offering 'essential retail', such as grocery and food, can stay open as can shopping centres if they contain units not required to close). The limited range of stores that can stay open are: supermarkets and other food shops, health shops, medical services such as dentists and opticians, pharmacies, petrol stations, bicycle shops, hardware shops, launderettes and dry cleaners, garages, vets, pet shops, corner shops, newsagents, off licences, Post Offices, banks, funeral service providers, storage and distribution facilities, public toilets and car parks needed to facilitate 'essential activity'.
  • Hotels, hostels, bed and breakfasts, campsites and boarding houses for 'commercial use'. However, people can continue to live in these as interim abodes while their primary residence is unavailable. Key workers, permanent residents, people who cannot move into a new home and non-UK residents who cannot return home can also stay in hotels, or similar, where required. These premises can also be used to support the vulnerable through arrangements with public bodies.
  • Libraries and community centres. Community facilities can stay open to host essential voluntary or public services, including food banks, homeless services and blood donation.
  • Indoor and outdoor leisure facilities. These include museums, spas and arcades.
  • Communal/enclosed spaces in parks, including playgrounds, although parks will stay open for people to exercise once a day.
  • Places of worship, except for funerals, although the guidance states that these can be used by ministers of religion to broadcast acts of worship and to host essential public services.

Alongside the above, the government has also prohibited public gatherings of more than two people, unless this is between members of the same household or essential for work purposes. The Prime Minister has specifically said that this means weddings and social events must not now take place. Work by tradespeople in peoples' homes can continue subject to following the social distancing and isolation guidance.

The position on takeaways and delivery services has not changed. These can still stay open, along with cafes or canteens at hospitals, care homes, schools, prisons and military premises and services providing food and drink to the homeless. Workplace canteens can only stay open where there are no practical alternatives, but where possible, staff should be encouraged to bring their own food and a takeaway service should be offered. 

How will the requirements be enforced?

The new measures will be in place for at least three weeks from close of trade on 23 March, at which point the government will review them. 

The emergency legislation enacted at the weekend (the Health Protection (Coronavirus, Business Closure) (England) Regulations 2020 and their Welsh equivalent) will be extended to include the new businesses listed above and also to apply to Scotland and Northern Ireland. Failure to comply with the requirements to close businesses is an offence punishable by an unlimited fine. Environmental Health and Trading Standards, who are responsible for monitoring compliance, will also be able to issue prohibition notices.

What does the guidance mean in practice?

The new guidance raises a number of unanswered questions. For example, what is 'essential retail'? What does 'commercial use' mean in the context of hospitality venues? How will businesses such as hotels work out who can and cannot continue to stay there? 

In addition, while the guidance is in places very prescriptive about the types of businesses that must close, some businesses may not fit squarely into the categories in the list. For example, some markets and health shops may sell items that are 'essential' but also operate prohibited activities, such as selling food or drink for consumption on site or offering beauty or wellbeing treatments. The new rules do not expressly address the treatment of some types of leisure premises, including private holiday rental accommodation, conference centres and wedding venues. 

If businesses are unclear about whether they can continue to operate all aspects of their business, it is worth immediately seeking further guidance from the relevant local enforcement agency to clarify the position. It may be that the effect of the increasingly stringent social distancing rules around working from home and self-isolation mean that it is no longer viable to keep businesses open, even if they are within the categories permitted to do so. 

Where business activities are changing, for example where a restaurant starts operating as a takeaway service, it is essential that businesses check that they are complying with applicable regulatory requirements and guidance, for example on food information, labelling and allergens. Given that Environmental Health and Trading Standards are taking a leading role in enforcing the new measures, businesses may find themselves under greater scrutiny on wider regulatory matters than they were previously.

Implications for supply chains

The extended measures are likely to create significant disruption to wider supply chains over the coming days. It will be important for businesses to keep their contractual arrangements and insurance policies under constant review. The measures raise some difficult questions for hospitality venues, such as large wedding venues offering accommodation. Do these venues have to cancel all bookings for the foreseeable future, or just for the next three weeks? Does the latest rule change trigger a force majeure event? Will insurance cover cancellations and do amounts already paid by customers such as deposits need to be refunded?

The latest shift in the government’s guidance may open up new options for relying on force majeure and termination provisions. Contracts with both customers and suppliers will need to be carefully reviewed, as the recent changes may now limit or improve businesses’ ability to recover their losses from others in the supply chain. Reputational issues will also be key – in light of the evolving social distancing guidance, businesses may choose to go beyond the letter of the business closures guidance in order to preserve customer relationships. If they do, they will need to think carefully about how this affects their contractual rights and obligations. In the longer term, businesses may wish to consider refreshing their terms in light of recent events, to ensure they are as robust as possible going forward.

If you require assistance with any of the issues discussed above, please contact Sian Edmunds or your usual Burges Salmon contact.

Key contact

Sian Edmunds

Sian Edmunds Partner

  • Food and Drink
  • Partnership Disputes
  • Private Wealth Disputes

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