State aid: Commission approves UK schemes to support SMEs affected by coronavirus outbreak

coronavirus products

(John Cameron, Unsplash)

This article is brought to you in association with the European Commission.


The European Commission has approved two separate UK State aid schemes to support small and medium-sized enterprises (SMEs) in the context of the coronavirus outbreak. The schemes were approved under the State aid Temporary Framework to support the economy in the context of the COVID-19 outbreak adopted by the Commission on 19 March 2020.

The UK support measures

The UK notified to the Commission two separate aid schemes to support SMEs affected by the coronavirus outbreak under the Temporary Framework.

The UK will set up the so called “Coronavirus Business Interruption Loan Scheme” (CBILS) which will provide respectively:

(i)          Under the first support scheme, guarantees that cover 80% of loan facilities for SMEs with a turnover of up to GBP 45 million (approximately € 49 million) to cover their working and investment capital needs. This scheme will be implemented through the British Business Bank, a national promotional bank.

(ii)         Under the second support scheme, direct grants to support SMEs affected by the coronavirus outbreak. The overall budget for this scheme is GBP 600 million (approximately € 654 million).

The beneficiaries of the schemes are SMEs active in all market sectors having temporary financial difficulties due to the economic impact of the coronavirus outbreak.

The Commission found that the UK schemes are in line with the conditions set out in the Temporary Framework. In particular:

(i)         With respect to the guarantee scheme, (i) the underlying loan amount per company is linked to the company’s liquidity needs for the foreseeable future, (ii) is limited to a maximum six-year duration, (iii) and entails a guarantee premium that is at least as high as that set in the Temporary Framework. Furthermore, the scheme includes safeguards to ensure that the advantages of the guarantee are effectively passed on to the borrowers and that the lending is used to cover short-to-medium term liquidity needs.

(ii)       With respect to the direct grants, the support per company will not exceed €800 000 (around GBP 734 000) per company as foreseen by the Temporary Framework. Futhermore, the grant amount per company is linked to the market sector in which the company is active, as also foreseen by the Temporary Framework.

The schemes will initially run until 30 September 2020, with the possibility for the UK to extend them until 31 December 2020.

The Commission concluded that the measures are necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State, in line with Article 107(3)(b) TFEU and the conditions set out in the Temporary Framework.

On this basis, the Commission approved the measure under EU State aid rules.

Background

According to the UK Withdrawal Agreement, during the transition period, the entire body of EU law continues to apply to, and in, the UK as if it were a Member State. This includes all EU rules relating to State aid.

The Commission has adopted a Temporary Framework to enable Member States to use the full flexibility foreseen under State aid rules to support the economy in the context of the Coronavirus outbreak. The Temporary Framework provides for five types of aid, which can be granted by Member States:

(i)          Direct grants, selective tax advantages and advance payments: Member States will be able to set up schemes to grant up to €800,000 to a company to address its urgent liquidity needs.

(ii)         State guarantees for loans taken by companies from banks: Member States will be able to provide State guarantees to ensure banks keep providing loans to the customers who need them. These state guarantees can cover loans to help businesses cover immediate working capital and investment needs.

(iii)        Subsidised public loans to companies: Member States will be able to grant loans with favourable interest rates to companies. These loans can help businesses cover immediate working capital and investment needs.

(iv)        Safeguards for banks that channel State aid to the real economy: Some Member States plan to build on banks’ existing lending capacities, and use them as a channel for support to businesses – in particular to small and medium-sized companies. The Framework makes clear that such aid is considered as direct aid to the banks’ customers, not to the banks themselves, and gives guidance on how to ensure minimal distortion of competition between banks.

(v)         Short-term export credit insurance: The Framework introduces additional flexibility on how to demonstrate that certain countries are not-marketable risks, thereby enabling short-term export credit insurance to be provided by the State where needed. On 23 March, the Commission launched an urgent public consultation with a view to establish if public short-term export credit insurance should be made more widely available in light of the current crisis linked to the coronavirus outbreak. More specifically, the public consultation aims at assessing the availability of private short-term export-credit insurance capacity for exports to all countries listed as “marketable risk countries” in the 2012 Short-term export-credit Communication. Depending on the results of the consultation and taking into account the relevant economic indicators, the Commission then may decide to remove countries from the list of “marketable risk countries” as a temporary measure.

The Temporary Framework will be in place until the end of December 2020. With a view to ensuring legal certainty, the Commission will assess before that date if it needs to be extended.

The Temporary Framework complements the many other possibilities already available to Member States to mitigate the socio-economic impact of the Coronavirus outbreak, in line with EU State aid rules. On 13 March 2020, the Commission adopted a Communication on a Coordinated economic response to the COVID-19 outbreak setting out these possibilities. For example, Member States can make generally applicable changes in favour of businesses (e.g. deferring taxes, or subsidising short-time work across all sectors), which fall outside State Aid rules. They can also grant compensation to companies for damage suffered due to and directly caused by the Coronavirus outbreak.

The non-confidential version of the decisions will be made available under the case numbers SA.56792 and SA.56794 in the State aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the State Aid Weekly e-News.

More information on the temporary framework and other action the Commission has taken to address the economic impact of the Coronavirus pandemic can be found here.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Why are the Balkans’ political leaders meeting in Geneva this week?

‘Dire consequences’ for a million children in the Middle East, North Africa, as funding dwindles

Brexit uncertainty keeps shaking the world’s financial markets

Guterres underlines climate action urgency, as UN weather agency confirms record global warming

Africa cannot afford to lose doctors to COVID-19

Knowledge is power: why the future is not just about the tech

Chart of the day: Why marine protected sites matter more than ever

Have we reached peak smartphone?

Building a stronger Europe: new initiatives to further boost role of youth, education and culture policies

Eating less beef and more beans would cut deaths by 5-7%

Cancer research put at risk by General Data Protection Regulation? The possible dangers of a data privacy EU mania

Cambodia: Giving back to UN peacekeeping

Sweden has a plan to end all traffic accident deaths

Economic sentiment and business climate stagnate in miserable euro area

Hunger, displacement and disease: 4.3 million people remain in dire need of aid in Chad

The world is a book and those who do not travel read only one page

Can we create an empathic alternative to the capitalist system?

Driving structural change through global value chains integration

Innovating together: connectivity that matters

GSMA Announces Speakers for Mobile 360 – Russia & CIS 2018

Antitrust: Commission opens investigation into possible anti-competitive conduct of Amazon

Food system failures in our age of abundance

EU on track to end use of chemicals harming the ozone layer

Fairer food supply chain: Agriculture MEPs clamp down on unfair trading

New European Bauhaus: Commission launches design phase

Virus Coronavirus: No time to die

UN rights chief calls for international inquiry into Kashmir violations

Understanding of LGBT realities ‘non-existent’ in most countries, says UN expert

2016 crisis update: the year of the Red Fire Monkey burns the world’s markets down

The UK referendum has already damaged Europe: even a ‘remain’ result is not without cost to Britain and the EU

Mobile health: The future of global healthcare

Fighting forest fires in Europe – how it works

How fintech is setting Southeast Asia’s SMEs free

In DR Congo, UN Security Council says December polls are ‘historic opportunity’ for country

US pardons for accused war criminals, contrary to international law: UN rights office

Lithuania finds the ways to maintain its energy security

These are the biggest risks facing our world in 2019

Monday’s Daily Brief: Earth Day, looking for a solution to Libya crisis, focus on indigenous issues, Security Council on Sri Lanka, a high-level visit to Bangladesh

EU budget 2020: Commission focuses its proposal on jobs, growth and security

Youth not prioritised in new Commission

UN health agency welcomes Facebook pledge to stop vaccine misinformation from going viral

Eurozone’s bank resolution mechanism takes a blow

The world is getting angrier, according to a new poll

Coronavirus Response: Commission welcomes ‘Best Practices’ to provide relief for consumers and businesses

EU Commission announces Safe Harbour 2.0 and a wider Data protection reform

Medical Education is #NotATarget

HPV vaccine: the silver bullet that saves women

Which countries have the highest unemployment rates?

Somalia’s population, international partners must be energized to sustain country’s ‘upward trajectory,’ says senior UN official

European Youth Forum @ European Business Summit 2015: Why interns should matter to business

UN report sheds light on ‘unimaginable horrors’ faced by migrants and refugees in Libya, and beyond

Mexico needs a new strategy to boost growth, fight poverty and improve well-being for all

Effective multilateralism the antidote to today’s ‘divisions’, Holy See tells UN Assembly

Bayer-Monsanto merger: the story of the rise of the “endless company”

These 4 Nordic countries hold the secret to gender equality

UN should be ‘exemplary’ in defending judicial independence, top Judge tells Security Council

European Youth Forum welcomes strong stance on human rights in State of the Union

Don’t believe the hype: offices are here to stay

‘Much more’ can be done to raise awareness about the plight of persons with albinism: UN chief

Climate change and its adverse impacts on health

More Stings?

Advertising

Trackbacks

  1. […] Commission has approved of two U.K. state aid initiatives designed to support SMBs, reports in The European Sting said this week. One of those schemes aims to cover 80 percent of SMB loan facilities, while the […]

  2. […] Commission has approved of two U.K. state aid initiatives designed to support SMBs, reports in The European Sting said this week. One of those schemes aims to cover 80 percent of SMB loan facilities, while the […]

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s