Coronavirus (COVID-19) - effect on rural businesses
The Coronavirus is putting many rural businesses under considerable financial strain and in some cases has removed overnight all means of bringing in an income. Events are being cancelled, attractions are being forced to close, transactions are stalling, tenants are failing to pay their rent or are trying to renegotiate rents, suppliers are unable to deliver on time, or at all. The consequences of the Government lockdown are numerous and far reaching.
We highlight some of the issues which rural businesses should consider in light of the pandemic and offer links to detailed advice from specialists within Michelmores.
To close or not to close?
Farming activities have been able to continue during the lockdown, subject to the additional requirement to ensure a 2m distance between workers, which can sometimes present practical difficulties.
But for many farms and rural estates, farming is only one activity of many. Whether other rural enterprises can remain open depends on the Government guidance published over the last week. For those businesses which have to close, there are a number of financial reliefs available as explained by Rachael Lloyd in Staying at Home and Away from Others: Impact on Businesses.
Job Retention Scheme
The Government has also launched a job retention scheme, designed to provide financial support for businesses, which keep employees on during periods of closure. For a fuller explanation of this new scheme see Coronavirus – update on the Job Retention Scheme.
Employee health & safety
Although most businesses will be focused on enabling their operations to continue to function and in supporting customers and clients, they must not lose sight of the need to protect their workforce. The easy transmission of the virus means that businesses must take additional steps to protect their employees, as well as considering whether employees can realistically work from home. Further issues to consider include:
- Risk assessments for home working
- Measures to protect employees who remain at work
- Updating policies & procedures for flexible working, home working and sickness absence
- Availability of statutory sick pay
- Requiring employees to take annual leave
- Enforcing short-time working or a reduction in hours
- Employees failing to follow hygiene rules
For fuller details of these matters and common questions regarding business closures and HR questions see Coronavirus (COVID-19) – advice for employers.
Seasonal workers and temporary staff
The rural sector has been particularly reliant on the annual influx of seasonal workers both for horticultural work and within the tourism industry. Coronavirus is likely to have a very significant impact on this as the pandemic has disrupted the flow of migrant workers into the UK. According to the Office for National Statistics, as of 2018, 99% of seasonal workers in the UK come from the EU. With Europe now in the throes of the Coronavirus outbreak, many of those workers are suddenly unable to come to the UK, due to the current travel restrictions. This immediately follows an already turbulent and uncertain period for the UK's agricultural sector, as it attempts to recover from the effects of Brexit.
Every year, the agricultural and horticultural sector needs around 70,000 seasonal workers to harvest the crops. In the last few days, a number of initiatives have been launched to recruit British workers into the industry, as the role is seen as 'crucial' under the Government's guidance.
Under normal circumstances, low unemployment rates in the UK make it difficult to draw in British seasonal workers; however, the Coronavirus pandemic is changing this, as many individuals, namely students and self-employed, find themselves without work. This is likely to be a short term solution, as many within the agricultural sector anticipate a significant drop in British recruits beyond the Coronavirus scenario, when those affected are able to return to their day-to-day jobs.
Diversification: Rural business (non-agricultural) tenancies
For rural estates which have let out business units, the Coronavirus is putting business tenants under intolerable financial pressure and there has been much discussion in the press about the Government's suspension of landlords' right to forfeit and tenants regarding this as a rent waiver. Much of this has been misunderstood. First, although forfeiture rights might have been suspended there are several other important remedies which have not. Secondly the rent will still be due and will accrue until it is paid. For a fuller explanation of this and other issues facing rural business landlords see Coronavirus and rent - options for rural business landlords and Coronavirus - lease management for business landlords.
If premises are let to rural businesses, which are forced to leave their premises empty, as employees work from home or the business ceases to operate, landlords will need to consider the insurance implications and make sure that the premises are not inadvertently left without cover - see Coronavirus update - insurance implications of unoccupied premises.
Rural dwellings – evictions
From time to time rural landlords need to repossess a dwelling for a variety of reasons. The Government has announced emergency Coronavirus measures to restrict evictions during this lockdown period. So any landlords either in the process of repossessing a dwelling or considering starting the process should take account of the new measures as described in Coronavirus (COVID-19) and eviction proceedings – tips for residential landlords.
Events and cancellation of contracts
Contracts govern virtually every transaction between businesses and between businesses and individuals. Some of these may be oral contracts, many will be on standard terms and a few will be bespoke contracts. So what happens if critical goods are supplied later or not at all or if an event has to be cancelled due to the Government lockdown? The answer is that it all depends on the contract between the parties. It may be that a "force majeure" clause in a contract will apply to relieve a party of liability or the doctrine of frustration will apply, but it will depend on the specific situation. For more on force majeure clauses and the doctrine of frustration see Coronavirus: claiming and responding to force majeure. For guidance on disruption to international supply chains see Coronavirus: impact on international supply chains and trade.
With so much disruption, businesses might find that their insurance policies provide cover for irrecoverable financial losses. There are several types of insurance cover which might be available to protect a business facing losses, due to the outbreak:
- Business interruption insurance
- Event cancellation insurance
- Trade disruption insurance
- Trade credit insurance
If any of these are to help, however, the loss will have to fall within the strict terms of the policy and the insurer will need to be notified without delay. If there is any possibility of a claim, the insurer should be contacted immediately.
For further details and advice on insurance options see Coronavirus Pandemic – is my business protected by insurance?
Planning and development
Although anecdotally some local authorities appear to have shut down all services which they consider non-essential, the Chief Planner has recently written to all planning services urging them to "use all options to continue your service and explore every opportunity to use technology to ensure that discussions and consultations can go ahead". For a full description of the Chief Planner's views on decision making, committees, enforcement, planning inspectorate duties, MHCLG casework and permitted development rights see Coronavirus (COVID-19) and planning.
The Government's instruction to ensure a 2m distance between all workers, who cannot work from home, is causing particular challenges in construction projects. With many rural estates constantly looking to diversify, there are doubtless projects in the pipeline, which could now be in jeopardy if everything grinds to a halt. Sam Phillips from our Construction & Engineering team considers what can still be done and what to look for in contracts – see Coronavirus and the construction industry - uncertain times.
Rural Estates and farms open their land and premises up to the general public for many different reasons: farm shops, festivals, sporting events, visiting heritage property, equestrian cross country courses, to name but a few, as well as public access on public footpaths and bridleways. Almost all of these uses will have been stopped with the Government lockdown due to Coronavirus. However, landowners may well have seen a rise in numbers using public footpaths, particularly on the edge of towns, as inhabitants escape cabin fever during their permitted daily recreation.
Questions have arisen as to whether land owners should close these public rights of way, if for instance, sheer numbers of people are causing bunching at gateways and stiles. The short answer to this is that landowners do not have any authority to block or cause any obstruction to a public right of way; it is local authorities who have this power.
Landowners have a responsibility to both lawful and unlawful visitors under the Occupier's Liability Acts 1957 & 1984, but it is difficult to see how liability for conduct (standing closer than 2 metres apart), which is prohibited by emergency Coronavirus restrictions could ever be imputed to the land owner under those Acts. If walkers stray away from the public footpath, then landowners are within their rights to require them to move back to the path and there would be some merit in posting signs to encourage walkers to follow the public rights of way.
If you would like to discuss any of the issues raised in this article, or have other concerns about the impact of Coronavirus, please contact Ben Sharples FRICS/FAAV, Partner in Michelmores' Agriculture team.
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This article is for information purposes only and is not a substitute for legal advice and should not be relied upon as such. Please contact our specialist lawyers to discuss any issues you are facing