Business interruption during COVID-19, the fallout continues


It is being reported that UKHospitality intends to ask for government assistance to encourage banks to be more lenient with borrowers in relation to the repayment of loans taken out under government Covid loan schemes.

The government backed schemes were set up during the pandemic to provide support to businesses struggling as a result of the various lockdowns and other restrictions. Kate Nicholls, chief executive of UKHospitality, which represents over 740 businesses in the hospitality industry, has warned that the loans have become a "ticking time bomb".

With concerns about current economic uncertainty, as well as high energy costs and interest rates, supply chain difficulties and a cost of living crisis impacting on consumer spending, many businesses are feeling the pressure going into 2023. It remains to be seen whether the government will step in to offer the assistance sought.

Interestingly, this news comes alongside reports that specialist insolvency practitioner, Manolete, will be working with Barclays to assist with the recovery of funds loaned through the Bounce Back Loans Scheme. This particular scheme was designed to help small and medium-sized businesses with loans of up to 25% of their turnover (the maximum loan available under this scheme was £50,000).

Barclays, reportedly the largest lender in the scheme, is partnering with Manolete to collect money from more than 100 companies that have defaulted on their bounce back loans. It is being reported that this will focus on funds misappropriated under the loan scheme.

Another piece of the puzzle when it comes to business interruption during the pandemic, are the BI insurance claims continuing to work their way through the court system. Following the FCA test case, the commercial court has sought to manage BII cases in a coordinated way given the parallels, and in some cases overlap, between the issues in different cases. 

On the horizon at the end of April is the hearing of preliminary causation issues in six cases, the lead case being that brought by London International Exhibition Centre against Royal & Sun Alliance PLC. There is also a significant hearing on the cards for October 2023 in proceedings being brought by Crowne Plaza London Gatwick Airport against Liberty Mutual Insurance Europe. This will consider issues of liability under denial of access provisions as well as credit for furlough payments.

You can read our previous overview of BII cases here.

All in all, 2023 should provide some further answers for businesses in relation to the financial fallout from the pandemic, with a good deal more to be discussed. Whether business get the news they will be hoping for, either by way of further government assistance or through the courts, remains to be seen. 

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UKHospitality is planning to ask for assistance with repayments on loans taken out under the government’s schemes when it lobbies Jeremy Hunt, the chancellor, before the spring budget. Kate Nicholls, chief executive of the trade association, said the government could ask banks to be more lenient with borrowers or demand that lenders automatically extend loan repayment terms to applicants.
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