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Navigating your business out of Covid-19

Businesses face further significant challenges as they emerge from Covid-19, but should be very positive about the resilience they have shown, a Balfour+Manson webinar heard.

The online event, Navigating your business out of Covid-19, offered a wide range of advice to SMEs, from re-examining all contracts, avoiding employment law pitfalls and being prepared to negotiate commercial property deals.

Robert Holland, Head of Employment and a member of Balfour+Manson’s senior management team, updated the audience on latest developments around the need for 14 days of quarantine if people were returning from Spain – and how employers might handle that if they needed staff back in the office. Unpaid leave and Statutory Sick Pay both presented real challenges in this context, he said.

Robert also talked in detail about working from home and the challenges of balancing a huge variety of demands to work flexibly as a return to the office became possible for many businesses. Full risk assessments to show the workplace was safe for staff to return was vital, he said, while also stressing that employers should be certain they had carried out all relevant due diligence for staff to work from home – including whether this was allowed under the terms of an individual mortgage, and if the relevant liability insurance was in place.

Staff were also asking about expenses associated with home-working, including heating, lighting and broadband, Mr Holland said.

He stressed that the well-being of employees had to continue to be a guiding-light for small businesses – as it was the right thing to do and made real business sense.

If redundancies were a possibility for SMEs as business support tailed off, Mr Holland advised firms to look at collective consultation periods and think carefully about how to discuss sensitive issues remotely.

Stephanie Zak, a Commercial Property Partner with Balfour+Manson, said businesses had to be very aware of whether they could end their leases and what their break options and notice requirements were.

“Lots of businesses owe a landlord rent or are worrying about paying,” she said. “There are measures to protect them [including extending the period landlords must currently wait before they can begin termination proceedings for non-payment] but the obligation to pay still exists. Don’t put your head in the sand; if you are in trouble, speak to the landlord and try to strike a deal.”

She said landlords were being encouraged to look at payment holidays and payment plans and to be reasonable with tenants – but this had to work both ways and tenants had to be reasonable too.”

Her fellow Commercial Property Partner Hugh Angus said about 20 per cent of commercial rents in Scotland were paid on time in June 2020 and many new leases were likely to be shorter with better break options.

He also said there might be some very different deals struck – for example, tenants asking for rent-free in return for taking on a longer lease. “This is not just about property, it’s about appetite for risk and reward,” he said. “There are real risks and opportunities and the successful businesses will be those who are nimble and have deeper pockets.”

Hugh said that he thought it could be a year or more before the commercial property market settled down. Stephanie agreed, saying it was too early to predict the impacts of the crisis on commercial property values – but she stressed that although some clients were downsizing, others had thrived during lockdown and were looking for more space.

Gordon Deane, a Banking and Finance Partner, urged all businesses to look very carefully at all their contracts – especially onerous, long-term supply contracts. “You might find a willingness to renegotiate agreements to preserve the ongoing trading relationship,” he said.

He also suggested looking at contracts that might not be able to be fulfilled because of the restrictions imposed as a result of the virus: “It might be no fault of a firm that they cannot fulfil the contract, but that might still constitute a breach, allowing you to terminate or renegotiate.”

Gordon also urged firms to look at their own terms and conditions as those who had thought their Ts and Cs through very clearly would be in a better position when it came to contractual issues.

Robert thought SMEs had used the crisis well to assess all aspects of their business: “They were really put on the spot and responded well by looking at everything – their office needs, their client base and much more – very carefully. Balfour+Manson has had to go through the same exercise.”

Ann Logan said the crisis had made Balfour+Manson look urgently at issues which wouldn’t necessarily have been examined in great detail: “One of the key things has been our communication as a management team – it’s easy to get caught up in the decisions you are making, but you have to let people into that process and tell them what’s happening.”

Robert said he thought one positive of the crisis was that home working could deliver increased productivity, and Stephanie agreed, saying that employees had worked very hard but also enjoyed the flexibility of working from home.

Gordon said although there have been a number of high-profile business casualties during the pandemic, SMEs that were fundamentally sound had a strong chance of survival.

“If you have a sound, strong underlying business and good financials, there is no reason you shouldn’t make it through this period,” he concluded.