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Lockdown - Reflections at the end of week 7

This week’s reflections come a day early as we prepare for the bank holiday and, in the midst of a global crisis, to reflect on the ending in Europe of another.

The emerging story of the week is the likelihood of an announcement of an easing of the lockdown, with significant levels of media speculation about what will and won’t be allowed as the government faces the hugely difficult task of balancing public health needs and the needs of the economy against a background of reports that the lockdown is becoming harder to maintain.

The decision as to when and how to ease the lockdown at this point is one of a series of tough judgements that the government will need to make in the coming weeks, months and years. I keep seeing in my mind’s eye a group of performers who I saw some years ago and whose act comprised riding fixed gear bikes both backwards and forwards in formation in a tight space whilst juggling and then spinning plates. The act required concentration, dexterity and an extraordinary ability to manage a large number of moving parts in order to achieve a co-ordinated and successful result. The illustration is by way of a fleeting entertainment and I don’t wish to trivialise our current circumstances, but it helps me in visualising the complexity of the challenges faced by government.

For businesses who have been impacted by the lockdown, there will need to be clarity and help in a number of areas. These include

  1. How long the furlough scheme will continue and how will it be wound down. For many businesses, the return to trading will be gradual and unlikely in the short term to produce the growth, turnover and cash that they would need to get back to full employment within their organisations. Having a proper amount of time to consider the options, in particular if redundancy consultation periods come into play, will be important;
  2. How will the working capital needed to crank levels of business back up be accessible to businesses who have got through so far by a combination of borrowing and deferment? If government is to tackle this, it seems that further deferments of tax payments will be needed;
  3. How can employees returning to work be made to feel safe and employers feel comfortable that they can provide a suitable health and safety environment which will not leave them vulnerable to claims or prosecution? Firm guidance will be needed from government and the HSE, but there also needs to be an acceptance that health and safety systems designed to counter Covid-19 must enable workplaces to be commercially viable;
  4. What impact will there be on infrastructure and public services? The pre-election indications of an end to austerity are now far behind us and government’s decisions on what is affordable will impact on many businesses; and
  5. How will it all be paid for? For the time being, government will borrow, but the borrowing can ultimately only be serviced by an increased tax take. Achieving a balance that is fair to all sections of our society – employers, employees, the wealthy, the retired, the unemployed and the vulnerable to list but a few – will take extraordinary skill and will still result in pain for many. It seems inevitable, however, that businesses will have to get used to paying tax at higher rates than we have been used to.

There are many other points which could have featured in this list, and further severe complications will arise if a second wave of lockdown becomes necessary. I don’t envy the cabinet their job-suddenly riding a bike backwards whilst spinning plates seems extraordinarily straightforward.

Enjoy your bank holiday weekend.

Ian Waine leads Prettys’ Corporate Services Team and has advised on a large number of corporate recovery and corporate restructuring cases over the last 30 years. He can be contacted on 07979 498817 or iwaine@prettys.co.uk

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