COVID-19: What business options do FMCG SMEs have?

It goes without saying that everyone is facing challenging times ahead, especially SMEs working in the food and drink industry. You may feel like you’re walking a tightrope between staying open and operating as usual, and enforcing stricter shifts to help protect the health and wellbeing of your employees. The demand from supermarkets is increasing as more and more consumers are panic buying, which means production needs to be ramped up. However, this isn’t necessarily the case for all businesses, particularly those that supply the food service industry or are in the middle of negotiating new listings.

At Ellisons Solicitors we understand your concerns regarding the impact on the economy and the effects this global crisis will have on your business, particularly in circumstances where there is no insurance cover for business interruption.

The government hasn’t provided strict guidelines as to what those working in the retail and hospitality sectors should be doing, but have said that they will do “whatever it takes” to support the economy.

During one of his daily press conferences, the Prime Minister also urged businesses to “stand by your employees, stand by your workers, because we will stand by you.”

Below is a list of the key measures outlined by the government in response to the pandemic:
- Businesses of all sizes will have access to a £330 billion package of Government-backed loans and guarantees
- Extending the new Business Interruption Loan Scheme, which was announced during the 2020 Budget, for SMEs to £5 million with no interest for the first six months
- A 12-month business rates holiday for every single business in the retail, hospitality or leisure sector (if they have a rateable value of less than £51,000, they can also receive a cash grant of £25,000 as well)
- £10,000 grants for all business which receive small business rate relief or rural rate relief
- The Coronavirus Job Retention Scheme. This allows businesses to access support from the government to continue paying up to 80% (£2,500) of their employee’s salaries for staff members who would otherwise have been unable to work and potentially laid off during this pandemic

In preparation for further disruption, business owners should now be looking to prepare cash flow forecasts and looking at ways to manage costs. They should also be looking for ways to protect themselves from becoming personally liable for the Company’s debts, and I would recommend that they speak to HMRC to discuss paying by instalments or suspending debt collection.

Other areas that need attention and contingency plans if the worst case scenario becomes a reality are; employees and pay, landlords, creditors and key suppliers.

As a member of R3, the association of business recovery professionals which is engaging with the government, Ellisons is in a unique position to understand the challenges businesses and individuals are facing at the moment.

We can help you to protect your business until more certain times, and we can do this by advising you on the various insolvency options available.  This may sound very drastic and scary, but these options can help to save your business by protecting it from creditors over the coming months. Having these safety measures in place can help to safeguard your business from irreparable damage resulting from the effects of the Coronavirus and the associated downturn in trade.

In order to restrict creditors taking action against your company that supports your family and the livelihoods of your employees, you would need to obtain a “statutory moratorium”. This will either enable you to trade with protection, or potentially allow you to temporarily cease trading until more certain times and the business can be rescued.

When it comes to staff wages, the chancellor has introduced the Coronavirus Job Retention Scheme. Boris Johnson has also suggested that a ‘universal basic income’ is among the options on the table to help workers who are threatened with the loss of their livelihoods. With daily updates, we will continue to follow Government plans closely and provide regular updates on our website.