Coronavirus: Government ‘must legislate’ to cover small business losses
New health advice to combat the coronavirus outbreak means the public are being told not to go to pubs, restaurants and entertainment venues to slow the spread of the illness.
But the government has stopped short of ordering the closure of businesses, with many in the hospitality, tourism and culture sectors warning that it would spell disaster by preventing insurance claims for interruption of business.
It comes as the Chancellor prepares to unveil a major package of support for businesses in response to the coronavirus crisis.
The UK Government is under pressure to take unprecedented steps to secure people’s livelihoods, with French President Emmanuel Macron promising €300bn of aid to ensure that “no business goes bankrupt as a result of coronavirus”. Rent payments and utility bills have also been suspended in France.
In a post on twitter this morning, the Association of British Insurers (ABI) said most businesses would be unable to claim, regardless of the government’s decision.
“Irrespective of whether or not the government orders closure of a business, the vast majority of firms won’t have purchased cover that will enable them to claim on their insurance to compensate for their business being closed by the coronavirus,” the ABI statement says.
“Standard business interruption cover - the type the majority of businesses purchase - does not include forced closure by authorities as it is intended to respond to physical damage at the property which results in the business being unable to trade.
“A small minority of typically larger firms might have purchased an extension to their cover for closure due to any infectious disease.
“In this instance an enforced closure could help them make the claim, but this will depend on the precise nature of the cover they have purchased so they should check in with their insurer or broker to see if they are covered.”
Edinburgh South’s Labour MP Ian Murray - who previously ran pubs and an events business - said the message from the ABI was “not what many insurers are saying” and insisted the government “has to legislate” to ensure payments to small businesses.
“Some [businesses] are saying they are not covered as this disease was not mentioned in their policy. But it didn’t exist five weeks ago.”
Mr Murray added: “I know from my own experience that the overwhelming majority of independent businesses do not have large cash reserves and many only survive week-to-week.
“Their cash flow problem isn’t one that’s going to be felt in months – it is likely to be felt within days.
“Following the government’s advice, many establishments which have served their communities for decades will simply close and never be able to re-open.
“This will result in the loss of tens of thousands of jobs, destroying livelihoods, isolating communities, and leading to a wider negative impact on the economy.
“The impact on staff who are on zero or short hours contracts, hospitality staff, freelancers and associated businesses is considerable.
“If the government is asking businesses to support their staff over the period, then the government has to support them to do so. Urgent action is needed.”
And Joanna Cherry, the Edinburgh South West SNP MP, posted on twitter: “If it’s accurate that most small businesses won’t be covered by their insurers for forced closure… then Rishi Sunak must announce Macron-style measures today”.