Retail's ability to adapt - Issue 4 YOUR QUICK REFERENCE GUIDE TO LEGAL DEVELOPMENTS IN RETAIL - RPC
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Issue 4 February 2021
YOUR QUICK REFERENCE GUIDE TO LEGAL DEVELOPMENTS IN RETAIL
Retail’s
ability
to adapt
Horizon scanning:
Retail timeline 2021/22
Retail Week: predictions
for a post-pandemic
landscape
Dealing with the Last Mile:
delivery, curbside
and in-store
Retail credit downgrades
Other key developments
ADVISORY | DISPUTES | REGULATORY | TRANSACTIONS >
Contents Welcome to the 2021 Spring
Edition of Retail Compass
3 Welcome to the 2021 Spring Edition of Retail Compass Welcome to the Spring edition of Retail Compass. We present our
guide to the key upcoming legal and policy changes affecting Retail
4 Foreword by Retail Week and our thoughts on the need-to-know issues – as retailers look
forward to a post-pandemic landscape.
6 Retail timeline 2021/22
8 Horizon scanning
20 Snapshot of retail statistics #1
We cover furlough fraud risk, retail credit rating downgrades, tighter regulations
around pre-pack administrations and much more.
22 Other developments
As well as our horizon scanning pieces and other developments, we have guest
30 Snapshot of retail statistics #2 contributions from:
Insights and opinion • Lisa Byfield-Green, Head of Insights at Retail Week, on what retailers can expect in a
post pandemic retail landscape
32 Coming to America: United States market entry tips • Andrew Cregan, Head of Finance Policy at the British Retail Consortium, on calls for
action on abusive credit card charges
• David Kaufman and Staci Jennifer Riordan from leading US firm Nixon Peabody LLP on
33 Dealing with the last mile: delivery, curbside and in-store tips to successfully enter the US market.
34 Time for action on abusive card charges We continue to include key statistics and links to our legislation tracker and list all of the
UK Government consultations and inquiries relevant to Retail.
36 Legislative bills tracker
We hope you find this publication useful, and as always, please do not hesitate to
contact us if you have any comments or queries.
36 UK consultations, inquiries and bills tracker
Karen Hendy, Co-head of Retail
37 RPC contacts
Jeremy Drew, Co-head of Retail
FROM TOP
38 An overview of RPC and TerraLex KAREN HENDY
Retail Compass is compiled and edited by our Retail editorial team, led by JEREMY DREW
Rachael Ellis (Associate).
IF YOU WOULD LIKE TO RECEIVE A HARD COPY OF THIS GUIDE,
PLEASE GET IN TOUCH WITH YOUR USUAL RPC CONTACT.
Retail Compass is printed on Fedrigoni Arcoprint, an environmentally sustainable paper
made with 100% recycled FSC® fibres. It is completely biodegradable and recyclable.
Disclaimer
The information in this publication is for guidance purposes only and does not constitute legal advice. We attempt to ensure that the content
is current as of the date of publication but we do not guarantee that it remains up to date. You should seek legal or other professional advice
before acting or relying on any of the content. >
4 Your quick reference guide to legal developments in retail
FOREWORD BY RETAIL WEEK 5
Foreword by Retail Week: “Consumers are
increasingly seeking out
New year, new strategy – and prioritising brands
what to expect in a post- and retailers that care
pandemic retail landscape for the planet.”
Most importantly, retailers and brands must be ready to
change and evolve to meet the rapidly shifting demands
of consumers.
By Lisa Byfield-Green, Head of Insight, Retail Week
More than any other industry, retail must of a third UK lockdown. Home-working As we saw in 2020, queuing and cash As far as Brexit is concerned, the Partnerships and ecosystems will Doing good will be good
constantly evolve to stay relevant. The year patterns are expected to persist far beyond are most definitely out and contactless, last-minute deal struck at the end of the drive growth for business
2020 was the most challenging in living the pandemic, and this has led to new frictionless experiences are in. These are year has been a relief for the majority of
memory, as the global pandemic disrupted shopper mindsets and behaviours. not new trends, but now is a time when retailers. Tesco is among those recently Over the past few years, we have seen As we navigate out of the global crisis,
our lifestyles and shopping behaviour. this technology really begins to matter reporting confidence now in both its an increasing number of partnerships consumers are likely to have a slightly
Additionally, in the UK, a prolonged period Home-based consumers have led to a to consumers. supply chain and ability to maintain low within retail, allowing brands and retailers different view of the world. Culture and
of uncertainty was finally laid to rest as a huge acceleration in online demand, prices. However, it is not without its to become more agile and reach new purpose, kindness and community will
deal was struck in the final hours to get requiring retailers to evolve and adapt The power of the store remains strong as challenges, as the hard border in Ireland customers. The M&S joint venture with all be important to us and these will
Brexit ‘done’. their strategies across areas such as a place for brand-building and inspiration, has created issues for those exporting from Ocado is a good example of this, as is intrinsically link to innovation, customer
supply chain, product development but brand relevance and customer the UK, both in food and non-food. Morrisons partnering with Amazon. As engagement and loyalty.
In a year that saw such rapid change there and marketing. experience must evolve to high standards pressure within the sector intensifies,
were seismic shifts within the industry, to tempt shoppers back. more tie-ups will follow as complementary Shoppers will actively seek out ethical
As we emerge from the crisis, brands Focus on sustainability and health brands and now is the time for businesses
some of which shook the very foundations partnerships help to drive efficiency
should prepare to serve a shopper that Sustainability and concern for the owned by minority groups to seize the
of big high street names including Arcadia Income inequality signals a and innovation.
and Debenhams. Purchasing behaviour is eager for more physical experiences environment have continued to grow, opportunity to make a real impact.
but at the same time highly familiar with polarised market As retailers aim to achieve more, they will
completely changed, as fear of the even as we all had other issues to deal with.
online shopping, with high expectations As economies strive to recover need to democratise decision-making and Peer-to-peer commerce will grow and as
pandemic meant that consumers stayed at Consumers are increasingly seeking out
for convenience, speed of delivery post-pandemic, we can expect a growing allow those further down the organisation we emerge blinking into the new world,
home and social events were cancelled. and prioritising brands and retailers that
and service. divide in consumers’ ability to spend. At to help drive innovation. community and togetherness will be
care for the planet.
However, as some retailers inevitably the top end, there will be opportunities something to celebrate.
falter, it is also true that others will emerge Local and hyperlocal trends can also be Policy makers can be expected to The accelerated channel shift has led
for luxury brands to sell to wealthier Most importantly, retailers and brands
stronger. Now with the glimmer of hope in expected to continue, giving retailers the incentivise sustainable business practices to ecosystems becoming even more
consumers, ie office workers who were must be ready to change and evolve
the form of a vaccine, there is finally an end opportunity to drive footfall with more in the coming year, focused on plastics, powerful. As the likes of Alibaba, Jingdong
largely able to keep jobs and save money to meet the rapidly shifting demands
in sight to some of this disruption. local and flexible range curation. packaging and ethical sourcing. As this and Amazon continue to dominate,
throughout the pandemic. However, as of consumers.
concern for jobs persists into this year the momentum grows, setting and measuring brands must focus on understanding ways
So, what should be at the forefront of our Frictionless, contactless major focus for most retailers must be to targets will be a key priority for retailers. to win, and optimise their marketplace We hope that the second half of 2021
minds as we prepare strategies for trading experiences engagement strategies accordingly.
compete on price and value for money. will bring a much more positive retail
in 2021? At the same time, health will be a focus
Technology trends into 2021 are likely to Retailers must increasingly act like brands environment for us all to enjoy, but
As both luxury and discount retail area and we anticipate more initiatives to
be focused on technology with purpose. and brands will become retailers, as they retailers must prepare now to ensure that
Flexible working and benefits, mid-market brands will need target rising levels of obesity, particularly
Retailers will invest to reduce costs and build direct-to-consumer models. they are ready to benefit.
to strive to differentiate their product considering its contribution to increased
channel shifts increase efficiency, for example via smarter and service offering to ensure that they morbidity during the pandemic.
Consumers have spent the last year largely supply chains, automation for online, remain relevant.
at home, both for work and leisure. At or by rolling out technology to improve
the time of writing we are in the midst customer experience.
>
6 Your quick reference guide to legal developments in retail
RETAIL TIMELINE 2021/22 7
Retail timeline 2021/22
Retailers facing reduced footfall and cash-flow during the COVID-19 pandemic should consider assessing
Immediate Credit ratings the risk of credit rating downgrades.
Retailers which buy or sell from or to the EU should consider examining goods to determine whether
Immediate Tariffs under the Trade and Cooperation Agreement (TCA) they are goods of ‘UK origin’ and exempted from the EU’s common external tariff on goods when they
arrive in the EU.
Immediate Key changes to IPR and taxation post-Brexit Key changes to IPR and taxation from 1 January 2021: see page 25 for taxation and page 26 for IPR.
Supreme Court judgment in Royal Mencap v Tomlinson-Blake expected to provide clarity on national
Expected early 2021 National minimum wage minimum wage entitlement for time not spent performing specific activities.
1 March 2021 TCA expected to be fully in force and ratified
1 April 2021 The Coronavirus Job Retention Scheme is due to come to an end
TCA: updated GB-NI e-Commerce Guidance is expected to be published by the government in
1 April 2021 time for the end of the three-month grace period for the sending of parcels from Great Britain to
Northern Ireland.
Single use carrier bag charge: From April 2021, the charge will be extended to all retailers and increase
April 2021 from 5p to 10p.
Single-use plastic sales (eg straws and drink stirrers) to consumers has been banned in England since 1 October
April – July 2021 2020. Surplus single-use plastic products purchased before 1 October 2020 can be sold until 1 April 2021 and drinks
products with single-use plastic straws attached to the packaging can be sold until 3 July 2021.
If approved, the government’s reforming regulations on pre-pack administrations are likely to
come into force in June 2021. The regulations would require administrators to seek independent June 2021
evaluation or creditor approval before transferring an asset to a connected party.
The long-stop for the extension period for data flows from the EU to the UK – whilst the UK awaits a
European Commission “adequacy” ruling to receive data. If no “adequacy” decision is forthcoming by July 2021
1 May 2021 or 1 July 2021, mechanisms such as standard contractual clauses will need to be adopted.
CE markings can continue to be used for most goods until 31 December 2021 (with the option for most
goods to affix the new UKCA markings required thereafter – until permanent attachment is expected 31 December 2021
to become mandatory on 1 January 2023).
Consider checking the rules: Certificates on Rules of Origin compliance may be required when
importing goods between the UK and the EU.
1 January 2022
The requirement to affix the new UK Conformity Assessed (UKCA) markings begins for relevant
manufactured goods placed on the Great Britain market. 1 January 2022
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2021 2022
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8 Your quick reference guide to legal developments in retail
HORIZON SCANNING 9
Horizon scanning >
HORIZON SCANNING
HORIZON SCANNING
CLICK TO REVEAL PAGE
Speed read
The furlough fraud risk: HMRC has
In this section we consider the key legal, regulatory and policy Strictly, when discussing these changes, we may not always The furlough fraud risk: HMRC has castcast
their net
their net––what
what can retailers do?
changes being faced by retail and what steps to consider taking,
in light of these. We cover both purely domestic aspects and
be talking about the jurisdictions in which we advise as a firm.
Therefore, whilst the following is intended to offer a helpful flag,
can retailers do? HMRC has made clear its intention
some which tie closely to European Union law and, as such, may we recommend tailoring your consideration of the changes to by Kelly Thomson, Partner and Charlotte Reid, to pursue
SeniorclaimsAssociate made in fraud or
impact upon retailers’ European operations. your own specific circumstances as there may be other local error under the government furlough
law considerations which affect you (and taking local advice
where necessary). schemes. To understand what risk
IMMEDIATE they face in this area (if any), retailers
Retail credit rating downgrades – how to stop a downgrade WHAT IS HAPPENING? WHY DOES IT MATTER?
should review any claims made
WHAT ACTION SHOULD YOU
under the schemes CONSIDER? and collate, on a
becoming a default While the government’s Coronavirus Job continuing 1.basis,
HMRC now has extensive enforcement any documents
To understand and
what potential exposure
by Sukh Ahark, Partner and Ed Colville, Legal Director Retention Scheme and Self-Employment powers under the Finance Act 2020
communications exists, review any claims made under
that provide a clear
Income Support Scheme (CJRS and SEISS and has already identified £3.9bn worth the schemes.
CLICK TO REVEAL PAGE > respectively) have provided a valuable audit
of furlough fraud which it intends to trail of2. decision
Collate, on amaking in relation
continuing basis, any
lifeline to many since their introduction, recover (although HMRC does tonotclaims. documents and communications to
IMMEDIATE Speed read the initiative has been described as a expect to have a complete picture of bolster your audit trail of decision
“magnet for fraudsters” by HMRC officials. the true extent of fraud and error under making in relation to claims.
WHAT IS HAPPENING? WHY DOES IT MATTER? Retail
WHATcredit
ACTION rating
SHOULD downgrades
YOU CONSIDER?– the schemes until the end of 2021 at the 3. Although claims made in genuine
The speed with which both schemes were error can expect some understanding
COVID-19 disruption and
resulting lockdown measures
Retailers typically use a range of external
funding; from large syndicated facilities
how1. to
Know your Facility Agreement – Most covenant
stop a downgrade becoming
breaches will allow lenders to declare a default implemented (a necessity at the time,
earliest). Given the high uptake of the
from HMRC, where retailers suspect
scheme in the retail sector, we expect
have particularly impacted and bond programmes, to smaller a default
and to demand early repayment of loans and/or given the urgent threat to employment retailers to be well within HMRC’s sights they have mistakenly claimed under
some retailers. For those hard- revolving facilities and overdrafts. They act as a draw-stop, blocking a borrower’s ability to caused by COVID-19) left them vulnerable the schemes they should seek legal
hit, signs of declining demand may also use additional banking facilities Retailers facing
draw funds underreduced
a facility. Thefootfall
specific types of to both deliberate and unintentional
now that investigations are underway.
advice as soon as practicable to ensure
HMRC’s enforcement powers allow it to
and profit erosion can cause such as invoice discounting, online and cash-flow during
covenant will vary, so it isthe COVID-19
important for retailers to abuse. Examples of misuse of the schemes investigate suspected false claims, claw
they can assist HMRC to the fullest
payment facilities or guarantee facilities, examine their finance agreements and associated extent, without inadvertently harming
concern for banks lending to
or utilise derivatives for hedging. It is
pandemic may find their credit ratings
documentation and flag any triggers. Resolving any
include placing employees on furlough back payments, and to impose significant
their position.
them. Other factors such as and then requiring them to continue
likely that these facilities were checked atare atarising
risk issues
of downgrade. Check penalties in the most serious cases. An
missed debt payments and will depend on careful analysis of the working as normal, pressuring employees
the outset of the pandemic for financial creditspecific amnesty period for self-reporting claims
renegotiation of rents can agreements; these may contain
wording in each relevant finance document. to work on a ‘voluntary’ basis, and made in error closed on 20 October 2020.
covenants relating to turnover and profits 2. Keep talking to your lenders – If you are facing a
and specific events of default linked to covenants potentialrequiring theincluding
maintenance
affect corporate credit ratings, claiming on behalf of employees without Penalties going forward are expected
covenant breach, a breach as a their knowledge. Given the levels of
which could in turn impact
retailers’ credit facilities.
missed payments, store closures etc. of theresult
retailer’s
of a creditcredit
downgrade, rating at a It is more
act promptly.
confusion and misunderstanding that
to start at 100% of the sums incorrectly
important than ever to maintain an open dialogue claimed; where remedial action is taken
Retailers with existing facilities in place predetermined level. Retailers can
with your lender(s), to keep them updated on issues
have surrounded the schemes, HMRC swiftly this may be reduced but the
should be mindful of any “rating triggers”.navigate expects there to be a large number of
beforepotential
they arise andcovenant breaches
assess any potential solutions. penalty will not fall below 30%.
Finance documents may include covenants claims which, whilst made in good faith,
obliging the retailer to maintain a credit
by identifying the relevant covenants
Lenders may require further information on the in
do not satisfy their rules.
causes of any potential or future breach. If the cause
rating above a certain threshold. In the advance and
can be engaging
linked to a temporary inissue
conversation
resulting from
event of a ratings downgrade, these with lenders early on.
COVID-19, there may be more flexibility to remedy
covenants could be breached, giving a the breach before enforcement.
bank a right to take enforcement action Check your reporting obligations to lenders which
against the retailer. may require you to notify lenders within a few days
of any covenant breaches. Even where a grace
period applies, a notice may still be required.
3. Apply for an amendment or waiver – If you know,
or suspect, that a downgrade is likely, consider
proactively contacting your lender(s). If the
downgrade relates to COVID-19 issues, lenders may
be willing to amend the relevant covenant or to
grant a temporary waiver of any covenant breaches
during the pandemic.
>
10 Your quick reference guide to legal developments in retail HORIZON SCANNING
11
Horizon scanning (continued) >
HORIZON SCANNING
HORIZON SCANNING
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Speed read
The UK-EU Trade and Cooperation Agreement (TCA) – The UK-EU Trade and Cooperation
Four key dates for retailers to watch Agreement (TCA) – Four key dates
by Henry Priestley, Partner for retailers to watch
As retailers get to grips with the detail
270m
of the TCA, the British Retail Consortium
Q1-Q4 2021 (BRC) has published a handful of key
WHAT IS HAPPENING? WHAT ACTION SHOULD YOU CONSIDER? dates in 2021 (below) relating to the
Further government guidance Whilst some of the following milestones are sector specific, retailers may wish to factor these into new developments, which retailers
is expected to be published their continued TCA compliance programmes where these are of relevance:
The estimated number of additional might want to consider as part of their
in relation to certain aspects
of the TCA which particularly
1. 1 March 2021 – Since the TCA came into force at 11pm on 31 December 2020, it has been applied customs declarations made to HMRC ongoing TCA-related workstreams. For
provisionally by both the EU and the UK, pending the European Parliament and Council of the EU’s
affect the retail sector (such per year from UK companies for those interested in the BRC’s latest work
scrutiny of the deal. At the time of writing, provisional application is set to end on 28 February 2021
as anticipated new guidance
(unless another date is decided by the Partnership Council – the joint UK-EU body which oversees EU imports. with retailers on the TCA, the BRC’s key
on GB-NI eCommerce
parcels), as well as deadlines
the TCA), meaning the TCA should be fully ratified and in force on 1 March 2021. contact in relation to Brexit-related
2. 1 April 2021 – Updated GB-NI e-Commerce Guidance is expected to be published by the government
and the ending of easement in time for the end of the three-month grace period (ie on or before 1 April 2021) for the sending of Source: BBC updates is William Bain.
periods relating to the parcels from Great Britain to Northern Ireland. The BRC has indicated that it is likely that individual
new developments. declarations will be required on individual packets after this time.
From 1 April 2021, products of animal origin (POAO) imported from the EU must:
– be pre-notified by the importer 24 hours before the relevant consignment is due to arrive,
through the import of products, animals, food and feed system (IPAFFS). Currently, POAOs
only need to be prior notified in this way if they are subject to safeguard measures, and
– be accompanied by an Export Health Certificate in order to facilitate remote documentary
checks in the UK.
From 1 April 2021, high-risk food and feed not of animal origin (HRFNAO) imported from the EU
must also be pre-notified by the importer 24 hours before the relevant consignment is due to
arrive, through IPAFFS.
3. 1 July 2021 – The long-stop extension period for data flows from the EEA to the UK, agreed under
42%
the TCA, expires on 31 April 2021 (extendable to 30 June 2021), and if no “adequacy” decision
from the European Commission is forthcoming by then, mechanisms such as the European
Commission’s Standard Contractual Clauses will need to be adopted to ensure data flows to the UK
party receiving the data are not interrupted.
– Until 1 July 2021, so called “restricted and prohibited” meat products (including chilled meat
preparations and frozen or chilled minced meat or poultry) can move between Great Britain
and Northern Ireland (subject to certain conditions agreed for this period), after which point, The percentage increase in
the government has promised to explore more permanent reciprocal arrangements.
4. 1 January 2022 – The TCA provides for certain temporary easements in an attempt to reduce the
probability of default across
burden on traders. Two such easements are set to expire on 31 December 2021: the consumer products
– from 1 January 2022, certificates on Rules of Origin compliance will be required when importing
goods between the UK and the EU, and
sector over COVID-19.
– from 1 January 2022, the requirement to affix the new UK Conformity Assessed (UKCA) marking See page 8 for more.
begins for manufactured goods placed on the Great Britain market – unless the goods are
subject to special rules for certain product types. From 1 January 2023 it must be permanently
attached and note that it is not recognised by the EU. Prior to 1 January 2022, the use of CE Source: Moody’s Analytics
markings is permitted unless the relevant goods placed on the Great Britain market meet the
following (and the UK and EU regulations remain aligned): (i) covered by legislation requiring
UKCA markings, (ii) require mandatory third-party conformity assessment, and, (iii) conformity
assessment is carried out by a UK conformity assessment body.
>
12 Your quick reference guide to legal developments in retail
HORIZON SCANNING 13
Horizon scanning (continued) >
HORIZON SCANNING
HORIZON SCANNING
CLICK TO REVEAL PAGE
Speed read
Key national minimum wage considerations for employers Key national minimum wage
ahead of Supreme Court judgment considerations for employers ahead
by Charlotte Reid, Senior Associate and Alessandro Cerri, Associate of Supreme Court judgment
An upcoming Supreme Court
judgment is expected to provide
EXPECTED EARLY 2021 clarity on National Minimum Wage
WHAT IS HAPPENING? WHY DOES IT MATTER? WHAT ACTION SHOULD YOU CONSIDER? (NMW) entitlement for time not spent
The Supreme Court is turning its sights on the extent to HMRC has a range of enforcement measures where there is We’d suggest it is good housekeeping for retailers to regularly performing
Working specific
time is broader activities.
than it may Several
initially appear. Employees
which NMW legislation applies to time spent at work but not non-compliance with the legislation – and workers are free review working practices to assess compliance with NMW/NLW whohousehold
are required to retailers have fallen foul
go through security checks upon entering
performing tasks. Employers should be alert to the amount of to report employers who they suspect aren’t complying. legislation. Of course, working patterns and practices develop over or leaving the workplace, for example, may be treated as
time their employees spend at the workplace, not working – for HMRC’s powers include: service of notices of underpayment, time but where possible, changes should be assessed “in the round”
of the relevant rules. In most cases,
‘working’ during that time. Similarly, employees who are
example when opening and closing, or when critical machinery civil penalties (eg a fine), recovery of underpayments and with current practices – with the legislation in mind – to avoid the failures
required aretraining
to attend staff rarely intentional
outside but
of normal working
retailers being inadvertently non-compliant. Below are practical hours, or employees who travel on business, to or from
is broken. If employees have to pay for their own uniform criminal prosecution. Workers can also bring a claim against are a result of not appreciating the
or equipment, or pay for benefits using a ‘salary sacrifice’ their employer for unlawful deduction from wages or breach considerations which a retailer may want to ask itself in assessing its customers during the working day, may be ‘working’ (for the
scheme, this may have consequences on compliance with of contract. compliance with NMW/NLW legislation. potential
purposes impactlonger
of the legislation) of small changes
hours than one would think.
NMW legislation.
1. Uniforms and mandatory equipment – There may be issues
to staff working practices that can
Additionally, employers should consider whether their
The government has now reintroduced its practice of “naming employees are required to carry out any tasks at the beginning
and shaming” the employers who fall foul under the NMW relating to employees being required to wear specific clothing, lead
of the day,to non-compliance.
before their shift has begun, orAs aftergood
their shift has
Naming Scheme. The latest list of employers was published uniforms or other equipment. Retailers should think about housekeeping,
ended, for example by lockingretailers shouldatregularly
up the workplace the end of
on 31 December 2020 after the scheme was paused in 2018 for whether any of their employees have to purchase their own the day.
equipment, or if it is provided for them. If the employer foots review working practices to assess
3. Payroll benefits and other deductions – Employers may
a review. Employers who owe £500 of arrears can be named;
those who underpay by less than £500 will still have to pay back
the bill, is it paid for through salary sacrifice payments or a lump compliance
offer with
an array of benefits thatNMW/National
can act as a key draw forLiving
new
sum payment from the employee?
workers and the associated fines.
When looking at mandatory equipment (think PPE), are
Wage (NLW) legislation and ensure that
employees and retain existing talent. Examples include
season tickets, saving schemes and tech products. A key
employees required to spend time at the beginning and/or any changes
question is how are such over time
benefits paid do notis itcause
for, and through
end of their shifts putting on and taking off such equipment? them
salary toorbe
sacrifice inadvertently
similar arrangements? Any non-compliant
regular
Are employees required to keep such equipment on during deductions from an employee’s salary (excluding applicable
their rest breaks? All of these questions may affect an (particularly bearing in mind that the
139
income tax and National Insurance contributions) should be
employer’s calculations in assessing its compliance with the COVID-19
carefully considered.pandemic has likely shifted
relevant legislation.
2. Breaks and ‘working’ time – We all know how important it is
the way
4. Payment that
and time somesystems
recording retail–employees
Businesses shouldare also
be on top of how their employees’ working time and salaries
for employees to use their rest breaks and management should arerequired to perform
calculated. Employees their tasks).
may be required to ‘clock in’ and
be mindful to ensure that these are treated as such for the ‘clock out’ at the beginning and end of their shifts. If this is the
Number of companies named in purposes of the NMW/NLW rules. For example, are employees case, employers should know the systems in place to record
required to take rest breaks on site, or within a certain area of
December 2020 for failing to pay the workplace?
time entries and whether such systems are programmed to
NMW to their employees. round amounts up or down.
Equally noteworthy, employers ought to remember that their 5. An additional consideration is to ask whether there are systems
employees may be required to be ‘on call’ when they’re not in place to track employees’ ages and apply the appropriate
actually working. This may be the case where an employee is NMW/NLW bands accordingly.
Source: gov.uk
on holiday but is still expected to respond to emails.
Alternatively, may a situation arise where employees are at
their posts but not actively working because, for example,
there is a technical fault at the workplace, or they are waiting
on the delivery of critical items such as materials, equipment or
machinery? If so, how is this time being treated?
>
14 Your quick reference guide to legal developments in retail
HORIZON SCANNING 15
Horizon scanning (continued) > >
HORIZON SCANNING
HORIZON SCANNING
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Speed read Speed read
Tighter regulations on pre-pack So much for zero tariffs: changes to
Tighter regulations on pre-pack administrations
administrations So much for zero tariffs: changes to customs
customsduties underthe
duties under the TCA
TCA
by Tim Moynihan, Senior Associate The government has announced plans by Robert Waterson, Partner and Harry Smith,
OnlySenior
goods ofAssociate
‘UK origin’ are to be
to reform pre-pack administration exempted from the EU’s Common
regulations. This will require External Tariff on goods when they
EXPECTED JUNE 2021 administrators to seek independent 1 JANUARY 2021 arrive in the EU. Retailers who buy or
WHAT IS HAPPENING? WHY DOES IT MATTER? evaluation or creditor
WHAT ACTION SHOULDapproval
YOU CONSIDER? before WHAT IS HAPPENING? WHY DOES IT MATTER? sell goods from or to Europe
WHAT ACTIONshould
SHOULD
The UK government remains concerned The draft regulations will transferring
1. Factor intoan assettimelines
purchase to a connected
– Currently, examine the goods involved to establish
YOU CONSIDER?
Prior to the end of the Brexit transition Only goods of ‘UK origin’ are to be exempted from the Retailers who buy or sell goods
about pre-pack administrations. Proposed prevent an administrator from party. If approved, these regulations
the voluntary regime still applies, but once the are their origins (and therefore their
draft regulations were released in disposing of all or a substantial regulations come into force in June, timelines for period on 31 December 2020, the UK EU’s Common External Tariff on goods when they arrive from or to Europe should
October 2020 which will require greater part of the company’s assets
likely to come
administrationinto
and force
potential in June
pre-pack 2021.
purchase operated as part of the EU/EEA single exposure
in the EU. Unless some substantial to customs
industrial process is duties
examine on involved
the goods
creditor scrutiny of pre-pack sales to to a person connected with prices should take into account the evaluation and market. Exports from the UK to EU Member import/export).
undertaken in the UK, goods imported from overseas to establish their origins (and
connected parties within eight weeks of the selling company in the first approval requirements. States were on a duty-free basis, and vice will not have a UK origin for these purposes (and the therefore their exposure to
the retailer entering administration. The eight weeks of administration, 2. Beware: the potential for challenge – It’s worth versa. On a similar but slightly distinct note, details of when this can happen are set out in the TCA). customs duties on import/
change in regulation should give comfort unless they have first obtained noting that an unfavourable evaluator report will goods imported from the rest of the world This means that UK retailers who import goods from export). It may be possible to
not prevent the administrators from going ahead into the UK could then be shipped to EU overseas to a warehouse in the UK (and pay import mitigate against the potential
to arms-lengths bidders for retail assets either creditor approval
with the pre-pack, but may lead to criticism and Member States without further payment of duty on importation into the UK) before selling them for double customs charges
out of administration where there may be or an independent (and
challenges by creditors. However, the regulations do customs duties. to customers in Europe face the inconvenience and by rerouting supplies (so that
a perceived unfair advantage (by some suitably qualified) evaluator’s
not clarify how easy it will be for creditors to launch cost of further tariffs being imposed when the goods goods with origins outside
stakeholders) obtained by the connected report. This report must
a challenge. The eventual agreement, at the proverbial the UK/EU are sent directly to
party during pre-pack processes. It include a statement on are imported in Europe; in practice, this makes British
3. Consider alternatives – Consider an alternative to eleventh hour, of the TCA between the their destination market); in
will also be of interest to unsecured whether the evaluator is retailers less competitive when selling to the continent,
pre-packs, such as schemes of arrangement or the EU and the UK was greeted with relief due course it is to be hoped
creditors whose interests are subordinate satisfied that the price paid since there is no mechanism to relieve this double
new restructuring plan procedure brought in by the among those who engage in trade between that the proposed Freeport
to secured creditors who often could for the asset is reasonable taxation. On the face of the TCA, these tariffs apply
Corporate Insolvency and Governance Act 2020 the UK and the EU. It was heralded as arrangements may also provide
be connected. in the circumstances. The whether or not the original importation of goods into
(CIGA) under which debtors and creditors can look preserving free trade between the UK and a way of reducing customs
evaluator must also believe the UK occurred before the end of the transition period. exposure, but for the moment
The government is now seeking to to agree a path out of financial distress. the EU. In the simplest of cases, where
that they have the requisite these look to be some distance
protect the interests of creditors goods are manufactured in the UK from Indeed, some retailers, particularly in the food sector,
qualifications and level of in the future.
following rising criticism of pre-packs. In UK-source materials and then exported to have expressed concern that this situation also applies
knowledge of the assets to
2015, a voluntary scheme known as the a final destination in Europe, it achieves it. even where the goods were originally imported to the
make their report.
Pre-Pack Pool was introduced to address However, modern commerce rarely fits UK from EU Member States before re-exportation to
concerns about pre-pack transparency – within these neat boundaries, and upon the EU. While there have been calls for a derogation to
in particular those involving connected further examination, the TCA fails to live up address this point, it remains far from clear that this will
parties. However, as this regime to the billing it has been given – especially be granted – and it is most unlikely that it would extend
remains entirely voluntary it has been of for retailers. to goods originally imported from third countries.
limited impact.
8 weeks
Key period of time following a retailer
going into administration which is
The share of UK exports accounted for by the EU has generally fallen
over time from 54% in 2002 to 43% in 2019. The share of UK imports
accounted for by the EU fell from 57% in 2006 to 52% in 2019.
Source: Parliament.UK, November 2020
affected by the proposed regulation on
pre-pack administrations.
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16 Your quick reference guide to legal developments in retail
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Speed read
New measures to eliminate
New measures to eliminate plastic waste plastic waste
by Henry Priestley, Partner and Brendan Collar, Associate With another lockdown continuing
and TCA-related challenges to deal
with, the start of 2021 may not have
APRIL TO JULY 2021 seen the environment at the top of the
WHAT IS HAPPENING? WHY DOES IT MATTER? WHAT agenda
ACTIONfor retailers.
SHOULD However, when the
YOU CONSIDER?
The government is set to introduce measures to further reduce Aside from the obvious environmental benefits, it is likely that Single-use carrier bag charge extended COVID-19
1. Though the carrierstorm
bag chargeeventually
is mandatory, passes, we
how retailers use
the circulation of single-use plastics and encourage the use of retailers that don’t comply with legislative changes will find Following a reported 95% reduction in the sales of plastic bags in theexpect
proceeds isenvironmental
voluntary – accordingconsiderations
to retail commentators,
recycled plastic. The measures are expected to influence all consumers are increasingly voting with their feet as environmental major supermarkets after the introduction of the plastic carrier bag nearly all use the funds to support good causes, resulting
aspects of the retail supply chain and have a particular impact on factors become a more defining feature of where they spend their
toestimated
in an be firmly£58m back
donatedin tothe spotlight
charities this
in 2017-18 alone
charge in 2015, the government has announced that from April 2021,
the food and drink sector. money. Though it may be more costly for retailers to comply in the the charge will be extended to all retailers and increase to 10p. year,Better
(Source: particularly
Retailing). As aas consumer
retailer, sentiment
if you continue to offer
plastic carrier bags, consider how additional proceeds from
short term, there may be possible sanctions for non-compliance towards environmentally conscious
the 10p charge may be leveraged this year (eg for different
and we expect more stringent measures and/or monitoring to be Although yet to announce what specific or new enforceability
introduced over time – so retailers may wish to get ahead now to measures will be put in place to police the increased charge, the goodbrands
causes). continues to grow.
Alternatively, consider We recap
the non-plastic options
the extent that they are not doing so already. Department for Environment, Food and Rural Affairs (DEFRA) some key legislative updates happening
available; we have seen some retailers move to bagless options,
has stated that it will take into account suggestions made at the for example.
Single-use plastic ban fines consultation stage. These suggestions varied from self-regulation
in 2021.
2. Consider how the PPT might affect you, now the draft
The sale of single-use plastic such as straws and drink (as retailers could stand to gain from the increased price), to an legislation is published, and watch out for government
stirrers to consumers has been banned in England since auditing regulatory authority. announcements for final details on the PPT.
1 October 2020. Surplus single-use plastic products purchased 3. With the DRS still in its early stages, affected retailers may
before 1 October 2020 can be sold until 1 April 2021 and drinks Plastic packaging tax wish to monitor this development to understand the legal
products with single-use plastic straws attached to the packaging There is now an economic incentive for businesses to use recycled framework and possible effects on operations, such as who will
packaging materials as plastic packaging produced in or imported be responsible for DRS operational costs. Packaging producers
can be sold until 3 July 2021. Any sales made after these dates risk
into the UK, containing less than 30% recycled plastic, will be will likely be seeking to ensure that they are not unfairly
local authority fines. Whilst catering establishments can continue to
taxed from April 2022. Draft legislation has now been published expected to meet the requirements of the DRS as well as future
provide single-use plastic straws at the request of customers, these
for technical consultation (and also see the draft explanatory packaging regulations.
cannot be offered to customers or stored in customer view.
note) setting out who it is proposed will be liable to pay the tax 4. Finally, at some stage, in-store protective plastic and screens
and will need to register with HMRC, how the tax will be collected, will become surplus to requirements as COVID-19 restrictions
recovered and enforced and how the tax will be relieved on are lifted – are there sustainable ways that this plastic can be
reused or disposed of?
exports. Further information may be found in the following: the
government’s latest Policy Paper (from November 2020) and:
Plastic Packaging Tax: policy design consultation and summary
of responses.
Deposit Return Scheme (DRS)
As part of the government’s Resource and Waste strategy, last year
DEFRA launched a consultation on the introduction of a DRS in
England. Effectively generating a financial motivation for recycling,
the scheme would require consumers to pay a deposit on drinks
containers which would be returned to them once their empty
container is disposed of at a collection point. Whilst the DRS was
initially expected to be implemented in 2023, implementation has
now been pushed back to 2024 due to the COVID-19 pandemic.
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18 Your quick reference guide to legal developments in retail
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Retailers supplying goods: what
Retailers supplying goods: what to know about your trade credit to know about your trade credit
insurance policy by Naomi Vary, Partner and Paul Baker, Legal Counsel insurance policy
If you are supplying goods or services
and seeking to rely on trade credit
APRIL 2021 AT THE EARLIEST insurance, there are some key aspects to
WHAT IS HAPPENING? WHY DOES IT MATTER? WHAT ACTION SHOULD YOU CONSIDER?
understand about your policy (below) –
In December 2020 the government announced that a number Although nobody wants to expect the worst, it is sensible for
before the risk of non-payment by your
Any supplier with the benefit of trade credit insurance operating If a claim needs to be made on the policy then the supplier’s
of CIGA protections, some of which support supply customers, suppliers to be prepared, so that they are in a position to take the in today’s stressed economic environment should consider
customer becomes acute.
prospects of a smooth process will be enhanced by provision
would be extended to March/April 2021 to give businesses what benefit of the protection offered by their trade credit insurance. familiarising themselves with the following, all of which are likely of a clear and well-documented claim, and full responses to any
the government termed “much needed breathing space”. With Trade credit policies operate within strict parameters, as insurers to be found in their policy in some form – and compliance with additional questions from insurers.
the imposition of the latest national lockdown, it is difficult to need to be comfortable with the insured supplier’s business which is important in respect of any claim(s):
predict with certainty when the protections afforded under CIGA practices and confident that these will be followed. Stepping outside Suppliers should also consider other means to mitigate their
will cease and it is possible that they will be extended further. these practices can lead to claims failing. • the maximum credit terms that the policy allows it to offer to exposure to distressed customers. Such measures might include
However, it appears clear that they cannot continue indefinitely. its customers. These may not be the same for all customers, (bearing in mind the above) shortening payment periods or
We expect customer payment defaults and insolvencies to so it is important to ensure that credit terms offered for every even moving to advance payment, bringing in or strengthening
transaction with any covered customer comply with the contractual protections such as retention of title which may allow
increase when the protections are removed. This will bring the
policy provisions a recovery of unpaid-for goods and obliging customers to provide
role of trade credit insurance under the spotlight.
• the maximum extension period that the supplier can agree financial information so that any distress can be spotted easily.
Trade credit insurance can be an effective risk mitigation tool without seeking insurer consent. There is an attraction to Finally, CIGA has brought in restrictions on the ability of suppliers
for suppliers, including those in the B2B retail space. Policies, seeking to push repayment dates down the road in the to terminate contractual arrangements with customers who
in summary, indemnify a supplier for losses caused following hope that fortunes will improve, but this is likely to require enter formal insolvency processes – in order to preserve those
non-payment by its customers, whether through default or agreement from insurers rights you might consider having earlier, pre-formal insolvency,
following insolvency. Many suppliers who never previously • the total credit limits available for customers, and the effect termination events.
needed to claim on their trade credit insurance may find of exceeding those limits. At best for the supplier, any trade
over the credit limit will be at its own risk. At worst, overtrading
themselves in a position where they now need to do so.
may lead to there being no cover at all in respect of the
relevant customer
• the Stop Shipment period and the requirements triggering
this. The policy will generally provide that there is no cover
for shipments made after the customer has failed to make
payment for previous supplies in accordance with agreed
terms, or is otherwise giving cause for concern. Again, trade
outside the Stop Shipment period will commonly be at the
insured supplier’s risk, and
“Trade credit policies operate • the need to seek insurers’ consent before entering into any
settlement of an outstanding debt with a customer.
within strict parameters, as insurers
need to be comfortable with the
insured supplier’s business practices
and confident that these will be
followed. Stepping outside these
practices can lead to claims failing.”
>20 Your quick reference guide to legal developments in retail
SNAPSHOT OF RETAIL STATISTICS 21
Snapshot of retail statistics #1
GOING LOCAL: REOPENING RESULTS RISING RETAIL ONLINE SALES AS USA
Footfall at UK retail parks was only 3.1% lower in December 2020, when they reopened SUBSCRIPTION A PERCENTAGE OF The use of click-and-collect services
after the second lockdown, compared with 2019. Footfall increases (of almost double SERVICES OVERALL SALES grew by over 60% in 2020.
in some cases) could be seen in smaller towns and high streets, compared to cities. In November 2020, online sales
39% of UK shoppers have signed Source: Statista
Source: Springboard up for a paid delivery or retail accounted for 36% of all UK retail sales.
subscription pass (up from 31% over
Source: Statista
the last two years).
M&A RECORD:
Source: Mintel
START 2021
RETAIL M&A: 2020
$38.8bn
Retail M&A activity decreased by (£28.2bn)
only 35% in 2020, less than financial
The value of takeovers involving
services (53%), property (42%) and
a UK company from 1 January to
hospitality (47%).
5 February 2021: the busiest start
Source: Experian to the year for takeovers since the
2008 crash.
Source: Dealogic
OVERSTOCK
SOLUTIONS
FOOD AND DRINK M&A
Fashion executives plan to
employ several strategies to
avoid overstock in the future: 61% 60% 55% 54% 47% 43% 37% 30% 6% Transactions which
took place in food and
Source: McKinsey-BOF
drink between May
15 and August (less than
half year-on-year)
Food and drink
transactions in
27 Q2 2020
Food and drink
transactions in
Reduce number
of SKUs
Improve
analytics for
Implement
a more agile
Revise
assortment
Implement
advanced
Reduce product
development
Move to seasonal
assortment
Reduce number
of collections
Other 34 Q3 2020
consumer supply chain structure (basics/ analytics lead time Source: Ogmha Partners
insights seasonal/
in-season)
>22 Your quick reference guide to legal developments in retail
OTHER DEVELOPMENTS | UK AND EUROPE 23
Other developments The turnover rent conundrum: tips for retailers
UK and Europe Protections provided to commercial
tenants under CIGA and the Coronavirus
Act 2020 are due to end on 31 March 2021
Tip: it is important that a specialist
solicitor advises on the terms of the new
arrangements.
The lack of rent certainty can also
have a significant impact on portfolio
valuation and the pricing of debt. Valuing
and now, more than ever, landlords are turnover leases requires an analysis of
having to explore the possibility of entering Most landlords are likely to be keen to previous years’ sales evidence rather
Here, we round up some other developments which have occurred since capture all sales generated from a set of
our last publication of Retail Compass (in July 2020). In the first few into non-standard leasing arrangements. than a guaranteed rental income over
premises, even those online, while we the life of the lease, meaning the debt is
developments we look at hot topics for retailers in the UK and also recap Whilst moving to a turnover lease or a expect that tenants would typically want to typically more expensive. With the retail
on some changes since the Brexit transition period came to an end which hybrid turnover lease may help to address exclude VAT and items with no margin such market changing, we expect that valuers
will be of interest to retailers with UK-European operations. The final few the sales volatility in retail at the moment, as stamps or lottery tickets. will inevitably be forced to change the
developments should be of particular interest to retailers operating in which has only been exacerbated by the traditional yield based valuation methods
pandemic, this approach is not without Landlords who do not have the
(or considering operations in) South Asia/China and the US. As always, we infrastructure in place to capture and and find alternative approaches.
recommend tailoring your consideration of these international topics to its difficulties and retailers may wish to
consider the following when negotiating analyse their tenants’ sales data in real Tip: Minimum rent thresholds and priority
your own specific circumstances as there may be local law considerations time (electronic point of sale or “EPOS”
with landlords: receipt of landlord success fees for good
which affect you. systems) will be reliant upon the turnover performance can assist in making turnover
A standard lease cannot simply be data provided by their tenants, including rents more palatable for lenders.
‘converted’ to a turnover lease; significant any returns made by their customers.
redrafting is usually required. Landlords may Historically, there has been a reluctance In the multi-channel age another hot topic
want to add a break option where the rent between landlords and tenants to share is which sales should be attributed to a
does not hit a given threshold, and “keep data. The landlords may insist on including store, and this will depend very much on
open” requirements become important reporting clauses, such as in-store turnover the specific store and the types of goods
where a landlord is relying on turnover for and footfall. being sold. The true value of a specific store
its income (perhaps coupled with a fixed often goes beyond the physical sales from
rent on any days when a property is not Tip: Retailers should be cautious when that one leased property as often it will also
open for trade). For retailers, ensuring accepting any reporting obligations and be used for brand building, showrooming,
that obligations can be complied with in all limit shared data to that strictly required click-and-collect, or returns.
hypothetical circumstances is important. for the rent calculation.
For instance, the effect of seasonal turnover In any event, the direction of travel is clear –
Moreover, any shared information turnover rents are the new normal in retail.
should be considered to ensure there is about a retailer’s sales and business
no disproportionally high rent payment finances should be subject to suitable
after Christmas, Black Friday or other confidentiality obligations.
‘shopping-heavy’ times of the year.
Redundancy flags in the time of COVID-19 Changes to taxation post-Brexit
CJRS entered its third phase in November The guidance has confirmed that, as criteria are fair will remain important. Remember, the following key tax changes Agreement between the UK and EU should The UK Government abolished the VAT
2020 and will remain open until 31 March expected, an employee’s redundancy Selecting furloughed staff for redundancy came into force for businesses from operate to eliminate customs duties (but Retail Export Scheme, meaning that visitors
2021, supporting 80% of an employee’s rights are not affected by their furlough because of their furlough status, or making 1 January 2021: not paperwork). to the UK from overseas can only purchase
salary up to a maximum of £2,500 per status. Where an employer elects to make furloughed staff redundant in a situation items VAT-free if the retailer arranges
month. This mirrors the support levels redundancies, it must observe the relevant where they could remain employed and The EU Common External Tariff, which was Businesses that trade in certain goods will shipping to their home address. This could
available back in August 2020 (though statutory or contractual notification furloughed, could give rise to a claim in force during the transition period, was now need to make customs declarations influence tourists to purchase goods online
employers may soon be asked to contribute periods and usual redundancy consultation for unfair dismissal, and/or potentially replaced in the UK by the Most Favoured when importing goods from or exporting rather than in-store during their visit to
more). It has been clarified that the support procedures. As always, employees with two a discrimination claim. In particular, Nation tariff. It will apply to all goods goods to the EU, in the same way as they the UK.
also applies to those who are unable to work years’ continuous employment are entitled questions could be asked about how staff imported into the UK unless there is a currently do for the rest of the world. If the
due to caring responsibilities, or because to a statutory redundancy payment, which were selected for furlough to begin with preferential arrangement (such as those in goods are classified as of UK origin (in the You can keep an eye on the government’s
they are clinically extremely vulnerable. In is calculated using a set formula based (eg if staff have been put on furlough place with the EU and Japan currently, with case of goods being imported into the EU) Brexit transition webpage here.
November 2020, the Chartered Institute on age, pre-furlough salary and length of because they have caring responsibilities, more countries in the pipeline) or if a tariff or EU origin (in the case of goods being
of Personnel and Development (CIPD) service (see the government redundancy or are shielding for health reasons, suspension applies. Goods exported to imported into the UK), import duty should
released its redundancy guide, which calculator here). subsequently pooling and/or selecting the EU will be subject to the EU Common not be payable – but the rules to determine
provides a much needed steer for both these employees for redundancy on the External Tariff, unless they are of UK origin goods’ origins are complex and restrictive.
employers and employees on how the CJRS Employers should take note – ensuring basis of furlough status would seem likely in which case the Trade and Co-operation
might affect redundancies going forward. that redundancy pooling and selection to cause problems).
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