The impact of Covid-19 on some high-profile businesses so far

In response to the coronavirus pandemic, the UK government has introduced the following range of business support measures:

• Coronavirus Job Retention Scheme (furloughing);
• Coronavirus Business Interruption Loan Scheme;
• Coronavirus Large Business Interruption Loan Scheme;
• Self-employment Income Support Scheme;
• Business Rates Holiday for Retail, Hospitality and Leisure (England only);
• Cash Grant for Retail, Hospitality and Leisure (England only);
• Small Business Grant Funding (England only);
• Statutory Sick Pay Rebate;
• Support for Businesses Paying Tax;
• Covid-19 Corporate Financing Facility;
• Business Rates Holiday for Nurseries (England only);
• VAT Deferral; and
• Deferral of Self-Assessment Payment.

Despite this, it is inevitable that some businesses will not be able to withstand the pressure introduced by Covid-19. Businesses will close and jobs will be lost. This article will look at some examples of high-profile businesses and their employees being impacted so far.

The High Street

High streets are empty.  As part of the nationwide lockdown Boris Johnson ordered all retailers selling non-essential goods to shut up shop.  Shops that are exempt from the Government’s ban are food retailers, pharmacies, hardware stores, corner shops, petrol stations, shops in hospital, post offices, banks, newsagents, laundrettes and pet shops.

Carluccio’s and BrightHouse both went into administration on 30 March 2020, putting 4,400 jobs at risk. Most of Carluccio’s 2,000 employees are being furloughed.  The government has given specific guidance for administrators in relation to furloughing employees:

“Where a company is being taken under the management of an administrator, the administrator will be able to access the Job Retention Scheme. However, we would expect an administrator would only access the scheme if there is a reasonable likelihood of rehiring the workers. For instance, this could be as a result of an administration and pursuit of a sale of the business.”

It is therefore open to the administrators to furlough employees, as they have done. However, there is no requirement on administrators, or employers in general for that matter, to furlough employees rather than make them redundant. It is also possible to make furloughed employees redundant. The jobs of furloughed employees remain firmly at risk.

The administrators of BrightHouse announced that it would not be making new rent-to-own or cash loan deals, which effectively means the business will close once its contracts are honoured.

Debenhams, Arcadia and Cath Kidston

On 6 April 2020, Debenhams declared that they would file for a “light touch” administration. This was to protect it from legal action by creditors while its department stores are closed. Debenhams has over 20,000 staff. The majority have been furloughed. It is not clear how many stores will reopen after the lockdown is lifted so redundancies seem inevitable.

Arcadia, which owns Topshop, Burtons and Miss Selfridge, has furloughed 14,500 of its 16,000 employees since the lockdown and said its board members and senior leadership are taking pay cuts of between 25% and 50%.

Cath Kidston was mid-turnaround plan when Covid-19 hit. On 5 April 2020, Cath Kidston pronounced that it was set to file for administration. Of the 941 UK employees, 820 have been furloughed.

Waterstones

Waterstones initially announced that it would stay open during the lockdown after making the bold claim that the book store was “no different to a supermarket or a pharmacy”. Notwithstanding this announcement, all of its 280 UK stores were closed on 23 March 2020 after a backlash from staff. Twitter was flooded with appeals to the bookshop giant to shut its doors amid the health crisis.  Waterstones placed the majority of staff on furlough. The managing director, James Daunt, said that “we do this with the support of the government when the alternative is to enact a wide redundancy”. The website states that “our teams are away on full pay”. This reflects an employer’s discretionary option under the Coronavirus Job Retention Scheme to top-up employees’ salaries.

Gordon Ramsay

It has been reported that Gordon Ramsay made 500 staff redundant on or around 25 March 2020. Coming after the announcement of the Coronavirus Job Retention Scheme, Gordon Ramsay ultimately chose redundancy over furlough for these employees. As noted above, the Scheme does not prohibit this. Gordon Ramsay received a wave of criticism on social media which he vehemently defended. It remains open to him to re-engage those who were made redundant and put them immediately on furlough leave.

On the subject of restaurants, Prescott & Conran, an upmarket restaurant group, and the Michelin starred Marc Restaurant Group have now closed in the wake of the Covid-19 pandemic.

Wetherspoons

Wetherspoons closed all pubs and hotels on 20 March 2020. Its website states that “the UK government’s ‘Coronavirus Job Retention Scheme’ has enabled us to retain the vast majority of employees whilst our pubs and hotels are closed.” This means that Wetherspoons has taken the approach of retaining the “vast majority” of staff but supposedly making a minority redundant. Wetherspoons had 43,000 staff on 24 March 2020.

It was also announced that staff could not be paid until the government grants kicked in. The Coronavirus Job Retention Scheme doesn’t specifically address this issue. It is something that should ideally be discussed with staff at the same time as the decision to furlough.

In response to the lacuna in pay, the other message sent out by Wetherspoons was that employees should take up other employment whilst on furlough leave, assuring them that this would not jeopardise their employment with Wetherspoons. Taking up other employment is allowed under the Coronavirus Job Retention Scheme so long as the employee doesn’t undertake any work for the furloughing employer, or for another linked or associated business, during the furlough. Employees should check their contractual provisions and ensure that they would not be breaching them before taking employment up with another employer.

Liverpool FC and Sunderland AFC

Liverpool FC took the decision to furlough a number of non-playing staff on 4 April 2020 before making a swift U-turn on 6 April 2020. This came after a spate of criticism decrying the fact that the club had made a profit of £42 million last year. As it stands, staff of Liverpool FC remain on full-pay without government assistance.

In contrast, Sunderland AFC took the decision to furlough their first-team, academy players and backroom staff on 7 April 2020. This comes after some non-playing staff were furloughed on 27 March 2020. A small number of staff continue to work from home. The club has committed to topping up its player and staff salaries. So, like Liverpool, staff remain on full-pay, but the government will be paying a proportion of their wages.

Football has been put on pause during the pandemic, placing enormous financial pressure on clubs. Lower league clubs are likely to be hardest hit as they rely more heavily on gate receipts. Further furlough decisions and redundancies loom. On 7 April 2020, the chairman of the FA said that there is a “danger of losing clubs and leagues”.

Airlines

As global travel ground to a halt, so did the revenue stream for airlines. Many companies have grounded their aircraft fleet. Airports have cut hundreds of jobs. There was a plea to the government to put together an assistance package to prevent airlines going bust. The government responded on 24 March 2020 by telling them to look elsewhere for funding. The Chancellor said the government would only step in as a “last resort”.

The applicable business support measures remain open for the airlines. Huge numbers of airline staff have been furloughed. British Airways has furloughed over 30,000 staff. EasyJet has secured a £600m loan from the Treasury and Bank of England’s emergency coronavirus fund. However, the industry still faces huge challenges. From a global perspective, for example, Aviation industry body the International Air Transport Association has said that up to 25 million jobs could be at risk.

Conclusion

It is not for us to take a moral or ethical view about the decisions of business: we leave that to others.  We can and do advise on the legality of redundancy decisions and whether employment laws have been observed or not.  It is clear that we are only at the beginning of things in terms of the impact on people’s livelihoods.  Please contact us for further information or for specific legal advice.  Stay home, protect the NHS, save lives and get well soon Prime Minister.

This article on impact of Covid-19 on some high-profile businesses was written by Heather Platt and Oliver Foy, if you’d like any further information on either counsel please contact Jonathan Cue on 020 7353 0711 or via email.