Even for the UK government, the pandemic has required unprecedented action to support UK businesses, their employees and to prop up the economy. The implications of this support package are likely to be with for us for the long term.

Following nearly three months of restricted business activity, it’s clear that the new ‘normal’ throughout the lifting of lockdown and beyond will be significantly different, bringing economic and legal implications for UK SMEs.

In this article, we take a look at how society is changing, how SME businesses will need to adjust and what legal implications and considerations SMEs should be aware of at this time, given the changing economic conditions.

In the UK, six million SMEs employ close to 16 million people.¹ These businesses are often born from years of hard work, resilience and a passion for learning; and they’re run by smart and agile thinkers. So it’s likely that many will refine their approach to the new normal and may even thrive in the post COVID-19 world.

Before the pandemic, it would be acceptable for people to 'invade' each other’s personal space in a busy shop or cafe, shake hands, or taste food items from counters that had had many people within two metres. But will this become a thing of the past? With the current development of a vaccine predicted to take anywhere between nine months and two years;² even after then, we’ll be more aware of cleanliness and used to many of the new behaviours adopted during the pandemic. In response, SMEs will need to adapt their business practices and offerings quickly and efficiently.

With daily life across the globe ground to a halt, the environmental impact of reduced human activity hasn’t gone unnoticed and has highlighted further the importance of sustainability.

With many working from home, travelling less and embracing tech connectivity, a stronger business focus and public awareness of health and wellbeing has also developed. These changes in behaviour will create new opportunities for SMEs but will also surface increased risks, for example, as dependency on the digital world is dramatically sped up and businesses have more exposure to cyber threats. 

On an individual level, we’ve all noticed the seemingly clearer skies and abundance of wildlife as human activity slowed during the lockdown. People have been making more of the green spaces close to where they live, appreciating the community feel that perhaps wasn’t there before. This may translate to changes in consumer behaviour and consumption. For example, people are more thoughtful about purchasing more ethically and from small businesses.³

With such a change across the world, it’s no surprise that a global recession has been predicted. Estimates suggest the UK economy will shrink by 11.5% in 2020, or more if there's a 'second spike'.⁴ On 11 March 2020, the Bank of England slashed interest rates from 0.75% to 0.25%, then a week later, rates were cut again to 0.1% – their lowest ever level. Plus, an additional £200bn of government and corporate bonds was purchased, with an aim to pump cash into the economy and keep the cost of borrowing low.⁵

The recession will be reflected in the reduction of disposable income per household of 17% in Q2 2020.⁶ This is significant, given disposable income drives around 60% of GDP.⁷

With the ease of online shopping and restrictions lifting, some consumers may be more inclined to spend money with smaller businesses to support the local community with some sectors inevitably doing better than others.⁸

But in a harsher economic environment, many SMEs may look to cut costs which may include their workforce. This poses the risk of legal disputes with employees, so it is vital that the correct steps are taken if any redundancies are made.

All UK employers have a duty to keep their employees safe at work under the Health and Safety at Work etc. Act 1974 and as it stands, COVID-19 doesn’t change this. If an employee contracted COVID-19 in the workplace and this was traceable, they may be able to make a personal injury claim against the employer if the employer was negligent in their health & safety measures, who could also be held vicariously liable for further infections in the employee’s household.⁹

Employers could also be investigated and prosecuted by the Health and Safety Executive – and that applies even where there’s no infection, if safe guidelines are not being followed.¹⁰

Here are some actions to help protect SMEs against legal risks in light of COVID-19:

1. Allow home working wherever possible – where staff are able to work from home they should continue to do so, unless it is jeopardising their health and safety for reasons such as mental health.
2. Read the government safety guidance – there are eight guides available which cover a range of sectors. In addition employers should display a poster to show you’ve compiled with the guidance.
3. Carry out a COVID-19 assessment – over and above complying with COVID-19 related government guidance, employers will need to carry out a risk assessment that considers the key hazards and risks associated with the workplace in light of COVID-19. Homeworking staff will also need risk assessments. The government provides some information around doing this and there is guidance available from the Health and Safety Executive.
4. Returning staff to work – carrying out a COVID-19 assessment will provide insight into how and when staff should return to work. But inviting vulnerable staff back should be avoided until further notice from the government and consideration as to how staff get to work should be made in light of the government guidance.

Many insurance policies include access to legal and tax advice, especially where legal expenses insurance is included. With a recession looming and new employee legislation to comply with, some SMEs may encounter problems, for example when managing employees’ return to work, any redundancies that are made and adhering to social distancing. In times like this, legal and tax advice helplines will prove particularly useful to SMEs as they can often be used as much as required at no additional cost. They offer impartial advise that doesn’t jeopardise SME’s life lines such as lending and cash flow.

If an SME does find itself in a legal dispute, then legal expenses insurance may cover legal costs associated with bringing an action in a number of scenarios, such as employment tribunal, contract or tax related disputes. The SME should check cover with their insurer’s legal advice helpline or refer to the policy wording for more information, including terms and conditions.

For any SME owner, it may be a daunting time to be running a business, with so much to balance and get to grips with. These times prove that the world can change almost overnight and so those who are quick to adapt will continue to prosper in the new climate.