What has just happened?
The economic activity in the United Kingdom and all over the world has declined drastically amid the global health emergency caused by coronavirus. Foremost among the industries most affected by the economic lockdown is the UK's travel sector, depending on the duration of the crisis, OECD estimates indicate that the potential shock could range between a 60-80% decline in the international tourism industry in 2020[1].
What does this mean?
Due to the abrupt end of tourists in the country, the UK has witnessed hotel chains being shut down for months, family-owned and start-up travel enterprises suffering heavily, Furthermore, tourist hotspots; museums, art galleries, and monuments deserted and all types of businesses that were previously thriving are now suffering drastically. Leading hospitality chain ‘Hilton’ has claimed that it expects a 5% improvement by early fall as economies cautiously reopen, and has predicted it would take 2 years for demand to rebound to pre-COVID levels.[2] Adjacent businesses such as restaurants, bars and souvenir shops are also suffering greatly during this period.
How does this impact the legal sector?
Due to the unprecedented effects of this health crisis, there are people everywhere who paid for holiday packages that had to be cancelled or deferred. As regular insurances of most businesses do not include a ‘cover for business interruption as a result of the general measures taken by the UK government in response to a pandemic’ clause[3], law firms will have an increased workload, as customers may not receive their refunds on time or at all. This prevailing issues will be discussed in court. As most airlines, travel businesses may choose to settle through promises of postponing trips scheduled, or miles provided for air travel, only high priority, or particularly complex cases would see the inside of a courtroom. In some cases, travel companies already in financial trouble due to COVID may not be in any shape to refund customers, even if taken to court. In the case of Thomas Cook, for instance, more than 150,000 British citizens have stranded abroad when the company collapsed, £1.7 billion in debt[4].
Another aspect of the industry that will face similar casualties is the travel agent sector, whether it is big corporations such as TUI Group or independent travel agents. Due to geographical and international travel restrictions, their business will suffer greatly even with economic sanctions provided by the government. Force majeure may be the destination most legal cases regarding travel issues come to, as courts pile up with millions of identical cases. Travel agents may insist on postponing planned holidays and trips instead of refunding money, however, traveler confidence is an aspect of this pandemic that may take longer than expected to be rebuilt.
A survey conducted by Visit Scotland on ‘The Impacts of Coronavirus on the Tourism and Events Industry’ indicates that the average length of survival of a business without support is 3 months[5]. Hence, SMEs not provided funds will be filing for bankruptcy, increasing the workload of the legal firms representing them.
A £106 billion industry, the travel, and tourism sector may just be the saving grace of the UK’s legal firms as lockdown eases and the economy starts back up again.
Written by Akanksha Soni
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References:
[1] OECD, ‘Tourism Policy Responses to the coronavirus (COVID19)’ (OECD, 14 May 2020)
[2]Ashwini Raj, ‘Hilton sees demand rebounding to pre-COVID levels by 2022’ (Reuters, 6 August 2020)
[3] ABI ‘Business Insurance’ (ABI, 22 May 2020)
[4] Kate Holton and Guy Faulconbridge, ‘Thomas Cook Collapses: Why and what happens now?’ (Reuters, 23 September 2019)
[5] Visit Scotland ‘MONITORING THE IMPACT OF COVID-19' (Visit Scotland, 29 April 2020)
Disclaimer: This article (and any information accessed through links in this article) is provided for information purposes only and does not constitute legal advice.