Public Policy

April 3, 2020

Business continuity & Covid-19: the reaction from EMEA Governments

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Our Public Policy Teams across the EU are helping clients navigate Governmental measures being put in place to protect business continuity in light of the Covid-19 pandemic. Here’s a snapshot of such measures. Should you wish to explore further or need advice on how to navigate these systems, please do get in touch.

Public-Policy_COVID19-Newsletter-dividers1-UK (1)

Government and Parliament: still functioning (mostly)

  • As the PM and a number of Cabinet Members self-isolate with symptoms or confirmed cases of Coronavirus, Boris Johnson hosted the first virtual Cabinet Meeting with Government Ministers participating via videoconference.
  • Parliament has begun its Easter Recess; however, there are cross-party calls for Parliament to operate virtually if it can’t return later in April as intended with more than 100 Labour, SNP and Liberal Democrat MPs signing a letter calling for the House of Commons to move online for the duration of the coronavirus outbreak.
  • Speaker Lindsay Hoyle has joined the chorus of those calling for the House of Commons to operate virtually saying MPs should be able to take part in Prime Minister’s Questions and debates via video if they are unable to return to work.
  • Following a virtual meeting of UK and UN officials, the COP26 climate summit in Glasgow will be delayed until next year due to disruption caused by the coronavirus. It is expected that the conference will now take place by the middle of next year.

Home Nations Governments providing additional support for businesses and communities

  • The Scottish Government has passed legislation giving them emergency powers over devolved matters including policing and justice and has announced additional funding for Local Authorities and businesses.
  • The Welsh First Minister has announced an economic resilience fund to support businesses, charities and social enterprises having cash-flow problems.

While some businesses pivot in response to COVID-19, others are struggling

  • A consortium of significant UK industrial, technology and engineering businesses from across the aerospace, automotive and medical sectors, has come together to produce medical ventilators for the UK; businesses involved include Airbus, Dyson, Rolls-Royce and Unilever.
  • Business Secretary Alok Sharma has issued a stark warning to banks, after concerns that up to a million companies could fold because they could be denied emergency loans.

Public-Policy_COVID19-Newsletter-dividers2-Germany

On 2 April, the so-called “Corona Cabinet” under leadership of Chancellor Merkel announced new measures to contain both the spread of the Corona virus as well as the economic impact the current crisis has on business and society.

New decision-making procedures: The federal government has restructured its work processes in response to the Covid 19 epidemic. Many decisions would now have to be made quickly and precisely. Therefore, “a clear working structure with flat hierarchies and rapid escalation steps is necessary”. A so-called “small corona cabinet”, consisting of the Chancellor and the Ministers of Research (BMF), the Interior (BMI), Foreign Affairs (AA), Health (BMG), Defence (BMVg) and the Chancellery (BKAmt), meets every Monday. It assesses the situation, identifies the main lines of action and carries out monitoring. At the regular cabinet meeting on Wednesday, there is now always an additional “situation briefing” for all federal ministers.  On Thursdays, the “Great Corona Cabinet” meets at which also other heads of department take part, who are either in charge of or advise on corona topics.

In addition, a so-called “procurement staff” has been set up at the Federal Health Ministry, comprising also c “liaison officers of German companies with international business”, with whom the Ministry had concluded framework agreements. The companies mentioned here are BASF, Fiege, Lufthansa, Otto and VW.

Addressing challenges in travel and recreational industry

  • Due to the worldwide spread of the SARS-CoV-2 virus and the associated travel and contact restrictions at national and international level, tourism and other air traffic in Germany, Europe and the world have come to an almost complete standstill. Previous cultural and social life has also changed dramatically: Due to the pandemic, musical and other cultural, scientific and sporting events can no longer take place.

Against this background, the Cabinet agreed to the following measures:

  • Regarding package holidays and air tickets: The responsible Ministries should approach the European Commission with the urgent request for a voucher solution that is practicable in the short term. A letter is to be sent to the Commission on behalf of the Federal Government calling on it to act without delay and to ensure uniform European regulations. The regulation should provide for the possibility for tour operators to issue vouchers to bookers in the event of pandemic cancellations of trips booked before 8 March 2020 instead of the refund due within 14 days.
  • Regarding cultural, scientific, sporting or other recreational events: In the event of cancellation of events due to the pandemic, the event organiser should be allowed to give the holder a voucher instead of a refund for tickets purchased before 8 March. The regulation should contain a hardship clause. The voucher should be limited until 31.12.2021. If the voucher is not redeemed by then, the price of the ticket is to be refunded.

Contact restrictions extended:

  • Already on 1 April, Chancellor Merkel announced that the current restrictions on public life will remain in place until 19 April for the time being. No relaxation is planned for the Easter holidays either. The federal and state governments have agreed to this. Chancellor Merkel appealed to citizens to refrain from private travel and visits – including by relatives.

Public-Policy_COVID19-Newsletter-dividers3-Ireland

Additional COVID-19 restrictive measures

  • The Irish Government introduced additional restrictive measures on Friday 27 March and has asked all citizens to stay home until Sunday, 12th April 2020, except in the case of a few described situations. In concurrence with the introduction on the new measures, the Government released an updated list of businesses services it considers to be essential, which is available to view here.

National Covid-19 Wage Subsidy Scheme

  • The Irish Government announced on 1st April that over 30,000 employers have registered for the new Temporary Wage Subsidy Scheme it introduced, with €34 million in wage refunds already paid out.
  • To recap, the Government will pay 70% of the normal take home pay for workers earning under €38,000 up to a maximum of €410 per week. For workers earning between €38,000 and €76,000, the Government will contribute up to €350, while employees earning over €76,000 are not eligible for the scheme. To qualify, a business must show that it has lost at least 25% of its turnover and is unable to pay normal wages and outgoings.
  • The main objective here is to maintain the employer-employee link, making it easier to restart companies when the Covid-19 emergency ends.

Working Capital Scheme

  • The European Commission announced on 31 March its approval of the Irish Government’s €200m working capital scheme to support firms through the Covid-19 outbreak, noting that the plan is in line with EU state aid rules under the temporary framework it has put in place to support the European economy through the crisis.
  • The scheme, administered by Enterprise Ireland (Irish state economic development agency) will allow firms in Ireland to access loans if they are experiencing or expect to experience a drop in turnover of at least 15 per cent due to the virus outbreak. Companies must have ten or more full time employees and operate in certain manufacturing sectors and/or internationally traded sectors.
  • The aim of the scheme is to provide companies access the necessary liquidity and funding to sustain their businesses in the short to medium term.

Ireland’s credit profile

  • The global credit ratings agency Moody’s has stated that the Republic of Ireland’s credit profile is “resilient” enough to withstand the cost of COVID-19, as it predicted the economy could contract this year by as little as 1.6 per cent. The agency said that Ireland’s A2-rated borrowing capacity should hold up as long as the crisis is relatively short-lived. They noted that the fiscal measures introduced by the Irish Government will help cushion the economic impact of the near-lockdown situation and the slowdown in global growth.

Public-Policy_COVID19-Newsletter-dividers4-EU

Coronavirus Response Investment Initiative Plus (CRII+)

  • On 2 April, the European Commission announced a new set of measures extending the scope of the first COVID-19 support package put forward in mid-March.
  • The new package complements the initial measures and aims to utilise all available funds from the European Structural and Investment Funds and grant additional flexibility in the use and relocation of funding, which are usually subject to stringent rules. It foresees possibilities for the transfer of funds between the three key “cohesion policy” instruments (the European Regional Development Fund, European Social Fund and Cohesion Fund) as well as flexibility when it comes to the allocation between or across those instruments.
  • The CRII+ package also outlines simplified procedures for programme implementation, the use of financial instruments and audits. The package foresees dedicated assistance for the most needy as well as for farmers and fishermen via the Fund for European Aid to the Most Deprived (FEAD) and European Maritime and Fisheries Fund (EMFF), respectively.

The SURE unemployment reinsurance instrument

  • The European Commission this week announced its intention to set up a new solidarity instrument aimed at assisting individuals and businesses directly affected by the crisis. The so called SURE initiative would make available up to €100 billion in loans to EU Member States in order to support short-term work schemes and other mechanisms protecting businesses and employees.
  • The loans will be based on guarantees provided by Member States and will be made available to all Member States although those hit hardest would benefit the most.

Possible extension of State Aid Temporary Framework

  • In mid-March the Commission significantly relaxed its state aid (subsidy) regulations as part of its response to the crisis. The EU executive has announced that it is seeking further extension of a COVID-19 temporary rulebook, specifically the inclusion of five additional types of aid measures.
  • Those include boosting support for coronavirus-related research and development and testing facilities, manufacturing products critical to fighting the outbreak as well as targeted support in the form of tax payments deferral or wage subsidies for employees. The proposal is currently being considered by Member States. A decision is expected shortly.

Greater flexibility for banks and financial institutions

  • In response to the difficulties faced by a number of borrowers and, in turn, by financial institutions during the crisis, the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) have issued multiple guidance documents calling on national supervisors to be flexible and pragmatic in the application of prudential requirements. Such flexibility could include the easing of reporting requirements or the postponement of prudential reporting deadlines.
  • Importantly, the EBA has also called for greater discretion in the assessment of loans whose performance is affected by the crisis. This means that credit institutions are invited to distinguish between borrowers temporarily vulnerable because of the crisis and those who are unlikely to become solvent again, thus limiting the impact of short-term insolvency on vulnerable borrowers’ credit score as well as on banks’ balance sheets.

Public-Policy_COVID19-Newsletter-dividers5-SA

Solidarity Fund: Potential Amendment

  • The government has set up a Solidarity Fund with seed capital of R150 million from the state. The Fund was aimed at funding efforts to combat the spread of the virus, but now there is discussion around it being extended to incorporate relief for businesses in distress as a result of Covid-19.

Business/economic measures: market response

  • There is significant push back in South Africa in terms of the extremely onerous and exclusionary nature of the business relief measures put in place. For example, self-employed owner operators do not qualify for relief. In addition, while the measures were announced quickly, the implementation is expected to be slow and difficult to access.
  • This week, 76 economists wrote an open letter to the Presidency asking for more significant and speedy response to the crisis in order to ensure that the economic impact is better managed.

Support to businesses and workers in distress as a result of Covid-19

  • There has been more clarity on the South African Revenue Services tax measures put in place to support business and workers during the Covid-19 outbreak.
  • Businesses with a turnover of less than R50 million can apply for a four-month holiday on certain types of tax.
  • Businesses can also delay one-fifth of their tax based on ‘pay as you earn’. These Businesses can also delay paying a portion of their provisional and income tax for 6 months without penalties.
  • Workers earning less than R6,500 will receive a tax subsidy of R500 for the next 4 months under the employment tax incentive scheme. This will cover roughly 4 million workers out of a population of over 59 million people. In addition, the many millions of workers in the informal sector on are not eligible to access this relief.

Public-Policy_COVID19-Newsletter-dividers6-UAE

New remote work policy issued by UAE’s Human Resources Ministry

  • The Ministry of Human Resources and Emiratisation has issued a new remote work policy for private businesses during the Coronavirus crisis.
  • The policy outlines guidelines for employers and employees who work remotely to ensure that both companies and employees will benefit from the arrangements.
  • Exempt from this rule are companies operating in infrastructure, supply, telecommunications, energy, health, education, financial sector, food industry, hospitality, medical industry and cleaning.
    UAE extends sterilisation programme, movement to remain restricted
  • The UAE has extended its national sterilisation programme has been extended until Saturday April 4, concluding on the morning of Sunday, April 5, officials announced on Saturday.
  • On Friday, the UAE issued a resolution on regulations for spreading communicable diseases, under which those who ‘violate precautionary measures to curb the spread of Covid-19’ will face penalties of up to Dhs50,000.
  • Dr. Farida Al Hosani, the official spokesman for the health sector in the UAE, said that the response to the programme has been positive. There is “a positive concern and commitment from the community that was reflected by the commitment of more than 70 per cent of the public, citizens, residents, and visitors, and this greatly contributed to facilitating the work of the teams at various levels.

Other

  • The Dubai Government is set to bail out Emirates Airline after its financial impact of the Covid19 pandemic. In a number of tweets Sheikh Hamdan bin Mohammed said: “Today, we renew our commitment to support a success story that started in the mid-1980s to reach its goal of sitting on the throne of global aviation. The Government of Dubai is committed to fully supporting Emirates at this critical time & will inject equity into the company.
  • President His Highness Sheikh Khalifa bin Zayed Al Nahyan has approved Federal Law No. 3 of 2020 regarding the regulation of the strategic stock of food commodities in the country, which is aimed at organising the food supplies in the event of crises, emergencies and disasters, as well as achieving food sustainability.
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