Opinion Piece: Businesses have reopened, but a hangover of disputes over the cost of lockdown awaits
In his latest opinion piece for inews.co.uk, Oakman CEO Dermot King explores how the pandemic how relationships between suppliers and customers, or landlords and tenants, have been left frayed
While the country is perhaps distracted by whether it has enough petrol, or more particularly petrol tank drivers, to go round, two other significant changes to Government’s management of the Covid pandemic happen this week.
The Government’s major plank of support to workers – the furlough scheme – ends on 30 September and, from the next day, the rate of VAT payable on restaurant and hotel supplies increases by 7.5 per cent. It’s hard to tell the difference between socialism and conservatism these days but inflation will create economic chaos.
This bumbling along approach to strategy will be recognised by many businesses as they attempt to resuscitate their trade following 18 months of on/off lockdowns.
Relationships between suppliers and customers, banks and borrowers or landlords and tenants have been left frayed.
Whereas a framework has been created for certain debts, such as those owing to HMRC, private debt has been left to parties to sort out themselves.
The only Government support has been in the form of a rent moratorium, so that landlords can’t lock tenants out.
This has been extended further to next March but only serves to protect the weakest businesses because the moratorium only deals with when the rent liability can be enforced rather than the amount.
In the absence of a framework, we get the worst examples of irresponsible capitalism.
On one hand large tenant businesses deliberately use the courts to pressurise landlords into taking huge discounts on rents due to them through company voluntary arrangements (CVA), while on the other landlords insist in the letter of the agreement despite their tenant being unable to operate through no fault of their own.
A CVA is an insolvency process that allows a company to enter into a contractual agreement with creditors to settle its unsecured debts or come to an arrangement with them over its affairs.
Banks have mostly deferred liabilities rather than reduced the price of it for the period of lockdown. Of course, many landlords, lenders, and suppliers have shared the cost of lockdown with affected businesses, but the courts will be required to sort the mess left behind by those who have not.
A framework similar to the furlough scheme, where employees were paid 80 per cent of their pay up to certain limits, would help settle disputes caused by lockdown and get the economy back to work.
Without guidance, we will see a huge backlog of cases building up in the court system as there are not enough judges. Of course, Boris’s solution will be to pay them more.