Retail's ability to adapt - Issue 4 YOUR QUICK REFERENCE GUIDE TO LEGAL DEVELOPMENTS IN RETAIL - Reynolds Porter Chamberlain

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Retail's ability to adapt - Issue 4 YOUR QUICK REFERENCE GUIDE TO LEGAL DEVELOPMENTS IN RETAIL - Reynolds Porter Chamberlain
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              >
Retail's ability to adapt - Issue 4 YOUR QUICK REFERENCE GUIDE TO LEGAL DEVELOPMENTS IN RETAIL - Reynolds Porter Chamberlain
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).

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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.                                                                                                                                                                                                    >
Retail's ability to adapt - Issue 4 YOUR QUICK REFERENCE GUIDE TO LEGAL DEVELOPMENTS IN RETAIL - Reynolds Porter Chamberlain
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.
                                                                                                                                                                                                                                                         >
Retail's ability to adapt - Issue 4 YOUR QUICK REFERENCE GUIDE TO LEGAL DEVELOPMENTS IN RETAIL - Reynolds Porter Chamberlain
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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Retail's ability to adapt - Issue 4 YOUR QUICK REFERENCE GUIDE TO LEGAL DEVELOPMENTS IN RETAIL - Reynolds Porter Chamberlain
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.

                                                                                                                                                                                                                                                                              >
Retail's ability to adapt - Issue 4 YOUR QUICK REFERENCE GUIDE TO LEGAL DEVELOPMENTS IN RETAIL - Reynolds Porter Chamberlain
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.

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                                                                                                                                                                                                                                       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?

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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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                                                                                                                                                                                                                                              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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                                                                                                                                                                                                                                                 Speed read
                                                                                                                                                                                                                                                 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.”

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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)
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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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