The coronavirus and UK Businesses

The speed with which the coronavirus story is shifting makes it hard to keep track of, but one thing which can be predicted with some certainty is that the virus itself, and the steps taken to deal with it, are likely to have huge ramifications for virtually every type and size of UK business.

Economists at Goldman Sachs have put the UK on track for a second consecutive quarter of zero growth from January to March, with coronavirus predicted to shrink output to -0.2% during the second quarter. The prediction is based on the degree to which the UK is exposed to global activity, and the same thinking has led Deutsche Bank to halve the UK growth forecast for the year to 0.5%. Add the fact that the London Stock Market opened on the morning of March 9th a with a massive 8.5% crash – the worst performance since the financial crisis of 2008 – and you have a backdrop against which the people in charge of any UK business, from SMEs to large corporations, will have to start planning for the on-going impact of coronavirus. The expected slowdown in business activity could have a particularly damaging impact on any business which has tax payments looming on the horizon. The government has hinted on providing flexibility in this area, so it might be useful for any business in this position to contact HMRC to discuss the possibility of spreading payments or reaching some other more flexible agreement.   

The impact on the travel and tourism industry has already made itself felt via the collapse of regional airline Flybe, but the ripples from the coronavirus – both direct and indirect – are likely to impact on businesses of every type. With manufacturing and exporting all but grinding to a halt in China, supply lines of everything from engineering equipment to components and office supplies are likely to be interrupted. Businesses should be drawing up contingency plans now to deal with an interruption in their supply of goods, since the interconnected nature of the supply chain in virtually every industry means that a problem of supply from China becomes a problem for the whole world.

If an employee is off sick with the virus itself then the legal situation with regard to sick pay will be the same as with any other illness. Complications are likely to arise, however, because of the government advice that any people who have recently travelled to high risk areas should self-isolate for 14 days.  As the virus becomes more entrenched in the UK, this advice is likely to widen to include anyone who has spent time with another infected person. This could lead to perfectly fit and well employees staying at home for 14 days. In cases such as these an employer is under no legal obligation to provide sick pay, but the best advice is probably that doing so would be the wisest course of action, not least because failing to do so could encourage high risk individuals to keep attending and potentially spread the virus throughout the workforce.

In addition, flexibility will have to be shown with regards to ‘fit notes’, which an employee may not be able to access while self-isolating. If an employee has to take time off work to care for a dependant – the possibility of a schools being closed down makes this a fairly likely scenario – there is no obligation to pay them, and the approach will depend upon established policy in a workplace. Once again, the need for flexibility when setting up contingency plans for working through the virus may prompt an employer to decide that the cost of supporting employees in this manner will be worth paying, given the longer term impact of fostering a culture of shared responsibility and co-operation as the crisis unfolds. It should be noted that in all of these scenarios any employer uncertain of their legal rights and obligations would be strongly advised to take advice from their lawyer.    

To talk about how the evolving coronavirus might impact on your business, and the steps you could take to minimise that impact, please contact the team at Bright Grahame Murray.