Business disruption is something that was once a little-discussed clause in contracts and insurance documents; now, it has become the main focus of legal matters in the UK since the pandemic.

As businesses acted quickly to protect their assets after the first ripples of the disruption caused by the pandemic, this has now given way to a recovery stage, in which we now find ourselves.

The challenges businesses are facing right now as a result of the pandemic can be narrowed down to a few areas. It is these areas where legal firms will need to focus their efforts to take advantage of the fluctuating workloads, and adapting to clients’ needs to cement a trusted business partnership.

Today we look at the picture that is emerging from the legal sector; where firms are struggling to meet demand, and which areas are still on hold due to the pandemic.

First let’s look at the main challenges facing businesses right now, which is impacting on the legal sector.

Pandemic Problems

Many businesses, as I’m sure you’re aware, have had to suspend or heavily restrict their operations.

Even now, four months after the start of lockdown in the UK, estate agents are nowhere near back to normal in terms of sales and lettings, with social distancing proving a problem for showing prospective customers around properties.

Other businesses are facing cashflow problems, struggles with contractual obligations and having to look at restructuring. We already see an increase in litigation in certain areas, as the full effects of Covid-19 on businesses come to light.

We are also observing an increase in legal cases being brought against the government, for their reaction to Covid-19. For example, the Independent Workers Union are suing the government for ‘failure to provide Covid-19 support for precarious workers’, and a number of cases involving individuals bringing legal action due to deaths from Covid.

We can expect to see a host of precedents being set in the legal cases emerging from the unique pandemic situation.

New Corporate Insolvency and Governance Bill

Despite efforts by the UK government to protect businesses from going under, the picture that is emerging is that sadly, there will be some businesses that do not survive the pandemic.

Businesses who have failed to make it through the recent troubling time will now be seeking help with insolvency and all associated legislation.

To help businesses with their unexpected closures, there is a new Corporate Insolvency and Governance Bill which came into effect on 26th June 2020.

The measures in this act aim to relieve the burden on businesses during the coronavirus pandemic and allow them to focus their efforts on continuing to operate during a period of insolvency, to take urgent steps to restructure, seek new investment or evade immediate creditor action.

Virus-Related Litigation

Once businesses have made headway in deciding where they stand on contracts that were created pre-Covid, we can expect that there will be a wave of litigation to ensure the same thing doesn’t happen again.

Insurance companies are currently locked in a battle with their clients in the aftermath of Covid over what constituted ‘business interruption’ as many contracts didn’t explicitly mention government-imposed closures. Clients believed that this should have been covered, insurers stated otherwise.

The Financial Conduct Authority has started proceedings with eight insurers and 17 of their clients over the wording of their insurance policies. Many companies have been unable to claim in some cases tens of thousands of pounds over the dispute of whether the government-induced lockdown was covered in their policies – highlighting the importance of wording in legally binding contracts.

Does the wording of your contracts need looking at to ensure they are pandemic-proof?

When Temporary Housing Laws Expire

The unprecedented mortgage holidays and blocks on tenancy evictions are shortly to come to an end, which will increase activity in property legislation which has been stagnant since the UK lockdown was imposed.

Real Estate Litigation vacancies fell by 53% in April. Still, with mortgage holidays ending in October and rent evictions frozen until the end of August, we can expect to see a sharp increase in these areas as the full effects of Covid are exposed.

Recent data found that 13% of renters have fallen behind with their payments, compared to around 4% before the pandemic. This means a potential increase in rent evictions of up to a third.

As courts are still operating in a socially-distanced way, court cases can expect to take longer, as the waiting time for court dates is prolonged. As this is the case in other areas of law, we can expect drawn-out proceedings for the time being. Perhaps once courtrooms return to normal, the legal sector will be over the worst of its disruptions and things can carry on in relative ‘normality’.

Planning and Restructuring

Looking at the direction in which the legal sector is going, is it time to look at where you need to make changes to your legal practice?

If so, we can help.

We are currently working with law firms in the North West to help them secure the best talent to ensure their practice can offer what the market is looking for.

Restructuring is going to be vital for firms as businesses everywhere look to salvage jobs and avoid another deep recession.

If you’re looking for insolvency or dispute and litigation experts, get in touch with us today. We will put you in touch with the best available talent right now, to future proof your practice.

About Clayton Legal

Clayton Legal has been partnering with law firms across the country since 1999 and during that time has built up an enviable reputation for trust and reliability. We have made over 5,000 placements from partners to legal executives, solicitors to paralegals and legal IT personnel to practice managers.

If you are building your legal team or looking for your next career move, we can help.  Call us on 01772 259 121 or email us here.

If you would like to know more about recruiting trends in the legal sector this year, download our latest guide here.