The rapid spread of the COVID-19 pandemic and the resulting government restrictions to individuals and selected business sectors has caused unprecedented interruptions and uncertainty. The scale of this disruption is manifest in the changes in GDP figures. According to the Office of National Statistics, the UK GDP fell by 20.4% in April 2020, which is in line with the predictions of the OECD for advanced economies. The OECD predicted the overall direct initial hit in many major advanced economies’ GDP to be between 20-25%.
This has had serious financial consequences not only for the affected sectors, but also the firms that insure and underwrite different types of economic activity. Furthermore, as current restrictions are lifted in response to reduced infection risks and changing policy, there is a need for parties to be able to enter into agreements where the trading environment may be subject to rapid change. If a sector is restricted again in response to changing infection rates, it may be necessary for contracts to explicitly deal with temporal conditions that are applicable at local or regional level. Examples might include a commercial lease based on turnover or a service level agreement based on supply of goods restricted by closing a manufacturing facility.
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