On Friday 13 March 2020, the European Commission announced its Coordinated Economic Response to mitigate the economic impact of the Coronavirus (COVID-19) pandemic. President of the Commission Ursula von der Leyen reassured Member States that the EU would provide "maximum flexibility on State aid" and do "whatever was necessary to support the Europeans and the European economy".
In its communication on the European Coordinated Economic Response, the Commission confirms that the COVID-19 pandemic qualifies as "unusual events outside the control of the government". In order to combat the economic effects of such circumstances, of which the most affected sectors are health, transport (particularly airlines) and tourism, the Commission notes that Member States are able to take swift action and provide "ample support measures" within existing State aid rules, for example:
For example GBER Article 50 already includes a provision to allow governmental authorities to create aid schemes to make good the damage arising from recognised "natural disasters", without any need to consult the European Commission first. This provision has previously been used to assist following events such as floods and earthquakes. It allows government bodies to fund up to 100% of the costs of making good the damage arising as a result of the disaster (ie. there must be a clear causal link) but must be netted off to the extent that the same damage is covered by existing insurance policies. To our knowledge this has not yet been invoked in response to a pandemic but it is surely being considered.
Further to the above measures, President von der Leyen announced a €37bn Coronavirus Response Investment Initiative, proposed to support the healthcare sector, the labour market and SMEs from all affected sectors. It is expected that the European Parliament and the Council will approve this proposal within the next two weeks. Under the initiative, the Commission would relinquish this year's obligation to request refunding of unspent pre-financing for European structural and investment funds (ESIF) currently held by Member States. Members States would use these amounts not recovered to accelerate their investments related to the COVID-19 outbreak under the European Regional Development Fund (ERDF), the European Social Fund (ESF), the Cohesion Fund (CF) and the European Maritime and Fisheries Fund (EMFF). For more information on ESIF and how to apply, see here.
In addition, €1 billion will be redirected from the EU budget as a guarantee to the European Investment Fund to support approximately €8bn of financing to help at least 100,000 European SMEs and small mid-caps.
In the UK, the government announced a £12bn stimulus package on Wednesday 11 March 2020 to counter UK Coronavirus shock. £7bn of this package will support the self-employed, small businesses and vulnerable people, and £5bn will be directed to the NHS.
What this package will mean for business:
Further to the above UK-wide measures, local authorities have also begun to unveil funding in support of citizens and businesses in their regions, such as Derbyshire County Council, which announced a £1 million fund on Thursday 12 March to complement the Government support announced in the budget. Council Leader Barry Lewis said it was an "initial amount and could rise, depending on how seriously the virus affected the county". We shall see if other regional and local authorities start pursuing similar initiatives.
The EU has also announced a new fund offering grants and other investments for SMEs involved in innovative projects linked to tackling the Coronavirus. Specifically the fund calls for expressions of interest from “startups and SMEs with technologies and innovations that could help in treating, testing, monitoring or other aspects of the Coronavirus outbreak”. The fund expressly states it is open to UK SMEs as well as those from other Member States. The fund opened on Friday and the call closes on Wednesday 18 March. Further information can be found here.
While the above measures by the EU and the UK are reassuring to businesses, particularly in sectors such as aviation, transport and tourism which are most affected, it is acknowledged that the situation in respect of the COVID-19 pandemic is evolving daily and that the EU and Member States must stand ready to reevaluate as the situation evolves. We therefore expect a wide range of further initiatives to emerge in the coming days and weeks, and at a variety of different governmental levels in different countries
For further information on how Governments can support struggling businesses under existing State aid rules during the COVID-19 pandemic, please see our recent press release.