Further UK government measures for business support
On Tuesday 17 March, UK Chancellor of the Exchequer Rishi Sunak announced a series of additional support measures to protect businesses during this unprecedented time. The Chancellor will make available an initial £330 billion of guarantees to business (equivalent to 15% of UK GDP).
What this means for large businesses:
What this means for SMEs:
For the Retail, Leisure and Hospitality Sector:
Government guidance on these measures can be found here.
Any enquiries on eligibility for, or provision of, the above reliefs should be directed to the relevant local authority in which a business is located. Guidance for local authorities on administering the business rates holiday is available here, which explains in more detail which properties will be eligible for the relief and the correct method of calculation. It will be for individual local authorities to adopt a local scheme and determine, as per the guidance, when to grant relief under section 47 of the Local Government Finance Act 1988 (as amended). Central Government will reimurse the local authority for the local share of the discretionary relief using a grant under section 31 of the Local Government Act 2003.
The above measures are all general in their application in the sense they seek to apply to all meeting a stated set of objective criteria. The expectation therefore is that all such general measures may be implemented without the same comprising State aid.
The above measures are an extension from the measures announced in the UK budget last week. For more information about last week's budget announcement, please see our previous press release.
European Commission Temporary Framework
On the same day, Commission Executive Vice-President Margrethe Vestager announced that the Commission has prepared a draft proposal for new Temporary Framework, to further enable Member States to support businesses affected by COVID-19. The Commission aims to have the new Temporary Framework in place in the next few days following consultation.
The new Framework is based on Article 107(3)(b)) TFEU to remedy a "serious disturbance in the economy of a Member State". This article was was also successfully invoked during the last financial crisis in 2009 via the "Short term provision of small amounts of compatible aid (De Minimis) scheme" (N43/2009) which recognised the exceptional nature of the disturbance and in effect extended the usual de minimis ceiling to allow public authorities across the UK to grant up to €500,000 per undertaking for a limited time.
While many similarities can be drawn to the Commission's approach to the last financial crisis, a notable contrast is that the Commission has been much quicker this time to increase the flexibility of State aid rules this time in order to help Member States sort out their own distribution of resources to struggling companies with legal certainty.
The Temporary Framework will enable Member States to
(i) set up schemes to direct grants (or tax advantages) up to €500,000 to a company;
(ii) give subsidised State guarantees on bank loans;
(iii) enable public and private loans with subsidised interest rates; and
(iv) safeguard aid channelled to the real economy via banks (the new Temporary Framework provides guidance on how to minimise any undue residual aid to banks and to make sure that the aid is passed on to the final beneficiaries in the form of higher volumes of financing, riskier portfolios, lower collateral requirements, lower guarantee premiums or lower interest rates.)
Assuming the above is formally adopted within a short space of time (as it surely will be) this will give Member State authorities, whether central, regional or local government, lots of room for manoeuvre to determine their own individual responses to COVID 19 using their own resources, while still being sure not to be creating a State aid problem. Likewise businesses benefiting from such schemes will be able to receive such funds in greater certainty of their legitimacy and therefore without fear of future requests for payback.
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.
DWF has a breadth of expertise in State aid law matters. We are able to draw upon a team of leading experts, in our UK, Brussels and other international offices, who have extensive experience in this area, including working within the UK Government on high profile funding matters, defending projects from recovery and designing projects to meet the rules.