From planes to pubs, from entertainment to energy, from medicine to manufacturing, one of the unique things about the coronavirus pandemic is its impact across the whole of the market – no sector is unaffected. And it is a truly global crisis - no country is unaffected and it would now seem that no continent has been as badly affected as Europe.
Under the transitional arrangements agreed between the EU and the UK, the UK remains subject to the EU state aid rules. On the 19 March 2020, the EU approved a new temporary framework for state aid measures to support the economy in the current COVID-19 outbreak. The purpose of this temporary framework is to allow member states and the UK to provide additional state aid to support business through the current crisis – as they did during the banking crisis in 2008.
Why?
This decisive action has two stated purposes: to keep businesses operating, and to maintain unity across the European economy. Different countries have responded to COVID-19 in different ways and will continue to do so. Companies failing in one corner of the Europe do not fail in a bubble, but will have a knock-on effect across the EU. But at the same time, a disproportionate use of state aid in some countries could create unstable market conditions going forward.
What?
The new temporary framework provides for new categories of aid. Member States and the UK will be able to:
- give grants or tax advantages of up to €800,000 under the framework; this is in addition to any de minimis aid which a recipient has or is entitled to receive .
- give subsidised State guarantees on bank loans;
- enable public and private loans with subsidised interest rates;
- support and use the banking sector to channel aid to final customers – especially small and medium-sized enterprises; and
- short-term export credit insurance.
There are a number of conditions attached to the giving of aid – including that the beneficiary must not have been in financial difficulties as at 31 December 2019 – the measures are intended to support businesses suffering as a consequence of COVID-19, not those which were already in difficulty. There are differing provisions for agriculture, fisheries and aquaculture.
The temporary framework also sets out minimum interest rates for subsidised loans and minimum premium levels for the provision of state guarantees.
So What?
The main thing to take away from this news is that the EU has opened the door for Member States and the UK to subsidise businesses struggling with the effects of the COVID-19 outbreak. The framework will require to be accommodated within a Scottish and/or UK state aid scheme. We don’t yet have a full picture regarding what aid will be made available to Scottish businesses at this time. As the pandemic unfolds, responses are appearing and changing at a dramatic speed. There could be new support available to businesses on any given day. Indeed, the EU may well be required to go further than this new temporary framework. Readers can keep up to date on these things in Scotland by regularly checking the UK and Scottish Government’s website and those of Scottish Enterprise and Highlands and Islands Enterprise. If we can provide any guidance or advice on the latest updates, please don’t hesitate to be in touch.
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