The second state of emergency ends

On 9 May 2021 the second state of emergency ended, which meant the lifting of the curfew and of regional border closures. The autonomous communities took over managing restrictions under ordinary legislation. With vaccination advancing, the country was entering a new phase of the pandemic, in which control of activity no longer depended on a single exceptional rule. It was, in a way, the end of one stage and the start of another that was more complex to manage.

For many businesses, the news was a relief after months of limited hours and capacity. But the change was not only one of degree but also of legal framework: where and how businesses could open, with what hours and what capacity, became more dependent on each region. A company operating in several communities had to follow several rules at once, and any of them could change from one week to the next. Keeping a record of the rules applying to each site avoids costly mistakes.

What a state of emergency is

A state of emergency is an exceptional instrument that allows extraordinary measures, such as curfews or regional border closures, to be adopted when serious circumstances arise. When the second one ended, those measures no longer had the same legal basis, and any later restriction had to rest on ordinary legislation and on the powers of each community.

In practice, the legal framework for restrictions became more fragmented and variable. Each region could adopt measures within its powers, with its own requirements and deadlines, and these depended on the health situation at any given moment. For anyone operating in more than one region, keeping up to date became part of the daily running of the business. It is worth appointing a person responsible for following changes and informing the team.

A gradual reopening

With vaccination advancing, the economy was starting to reopen in earnest. For businesses that had spent months with limited hours and capacity, the end of the state of emergency meant more room to act. Even so, that room was not the same everywhere, and it was wise to check often what applied in each place.

For families, the change was felt in daily life: more freedom of movement, more social activity and, with it, more spending. For businesses, however, opening is not the same as recovering the turnover of before. Reopening is not the same as returning to normal, and demand takes time to adjust to the new conditions. Consumer habits, travel and tourism do not come back overnight, nor always to the same level.

Adjusting the structure to the pace

For hospitality, retail and tourism, the question became how long demand would take to return, and at what cost. It is worth reviewing the staffing needed, the stock and the rental and supply contracts against scenarios of gradual recovery, and keeping abreast of the rules in force in each region. A calendar with reopening milestones and review dates for the rules helps to anticipate decisions.

It is useful to prepare at least three scenarios, a cautious one, an intermediate one and an optimistic one, and decide in advance what would be done in each: how many staff to take on, how much stock to buy, what hours to keep. Discussing those assumptions with the bank and advisers avoids improvising when the numbers do not add up. Keeping open a dialogue with landlords and suppliers about payment schedules can provide room to manoeuvre.

Demand will return at its own pace; prudence lies in adjusting the structure to that pace.

This article is general information. It is not legal, tax or investment advice, and it does not take anyone’s particular circumstances into account.