Business continuity and Covid-19 – how Governments are reacting across EMEA
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.
All non-essential shops and public places have been ordered to close. The UK Government has asked the UK’s mobile networks to send a mass broadcast to as many as 60 million UK mobile numbers alerting them on the new rules. The UK Parliament has begun its Easter recess a week earlier than planned; while scheduled to return in a month’s time, it could be further delayed depending on medical advice. Some MPs have called on the PM to ensure Government is still held to account so Select Committees can scrutinise Ministers using video technology
- Chancellor Rishi Sunak is expected to unveil further emergency measures for self-employed people whose income has plummeted due to Government-imposed restrictions but has ruled out a specific support package for the aviation industry
- Work and Pensions Secretary Thérèse Coffey has revealed that 477,000 people had applied for Universal Credit in the past nine days.
- The Foreign and Commonwealth Office continues to try and organise repatriation flights for UK citizens stranded abroad as airlines cancel flights and countries close borders while the Home Office has announced that visas will be extended for those currently unable to return home due to Coronavirus
- Five hundred British Transport Police officers are being deployed to rail stations to remind people to travel only where essential and the Government has suspended normal Rail Franchise Agreements to stop train companies collapsing
- Emergency legislation adopted on 25 March will make an additional £266bn available for Whitehall departments to spend on “contingencies” over the coming months without getting advance approval from parliament.
- UK companies have been given an extra two months to publish their results as financial regulators enact a string of measures to help them weather the current “extraordinary circumstances”.
Financial aid package self-employed workers
The Chancellor has announced a new self-employed income support scheme which will run for three months.
- The government will pay self-employed people a taxable grant based on their previous earnings over the last three years, worth up to 80% of earnings, and capped at £2,500 a month.
- The scheme will be open to those already in self-employment who earn the majority of their income through their self-employed work and with trading profits of up to £50,000.
- To avoid fraud, it will only be open to people who have a tax return from 2019.
- Sunak claimed that the programme will be up and running no later than June and said that 95% of the self-employed will be covered.
- Anyone who missed the deadline for their tax return will get an extra four weeks.
- Sunak also announced that a greater number of self-employed people will also be eligible to apply for universal credit.
Covid-19 Emergency Laws have passed the UK Parliament with cross-party support
- Providing for emergency registration of former medics and includes a clause intended to safeguard public health by ensuring every person in the United Kingdom is able to access NHS care without incurring a financial penalty or immigration sanction.
- Other measures include protection for residential tenants ensuring nobody will lose their home as well as measures and protections for commercial tenants and landlords.
- Additional powers include shutting airports and the power to detain people on public health grounds.
- The House of Commons will be able to express a view on whether these wide-ranging powers should be continued or not every six months.
Launch of the Economic Stabilisation Fund
On 25 March, the German Federal Parliament set aside the so-called debt brake rule that restricts public spending for the sake of a balanced budget. This paved the way for enacting a supplementary budget, marking the launch of the economic stabilisation fund which will implement the measures needed to safeguard the German economy and jobs. The package includes a supplementary government budget of 156 billion euros, 100 billion euros for an economic stability fund that can take direct equity stakes in companies, and 100 billion euros in credit to public-sector development bank KfW for loans to struggling businesses. On top of that, the stability fund will offer 400 billion euros in loan guarantees to secure corporate debt at risk of defaulting, taking the volume of the overall package to more than 750 billion euros.
The instruments of the Economic Stabilisation Fund comprise among others:
- A guarantee framework of €400bn to help businesses find refinancing on the capital market
- Recapitalisation measures totalling €100bn to increase capital and ensure businesses remain solvent
- Loans of up to €100bn to refinance the KfW’s special programmes
Access to these instruments will be given to businesses which fulfil the following criteria:
- Balance sheet total exceeds €43m
- Sales revenue exceeds €50m
- Annual average of more than 249 employees
To make sure that as many businesses as possible can access these instruments, the group of eligible beneficiaries will be expanded beyond the European Commission’s definition of small and medium-sized businesses. Furthermore, access will also be granted to smaller businesses that are particularly important for infrastructure. The Economic Stabilisation Fund will initially run until the end of 2021
Response to EU Guidance to ensure continuous flow of goods across EU via green lanes
On 23 March the European Commission issued guidelines on, “green lanes”, which call on all Member States to designate priority lanes to be opened to all freight vehicles, irrespective of what goods they are carrying. This is in response to transport routes and supply chains that have become compromised by efforts to contain Covid-19.
The Government’s priority is to preserve all manufacturing activity and essential services and to keep supply chains operating. Challenges in keeping borders open and ensuring continuity of freight operations. No Government restrictions exist on essential services and businesses. All debt enforcement suspended until further notice by Revenue Commissioners.
Working Capital Scheme
A €200m Strategic Banking Corporation of Ireland (SBCI) Working Capital scheme will be made available to eligible businesses impacted by COVID-19 with a further €200m package to become available through the Irish States development agency, Enterprise Ireland. Action on Planning during the Covid-19 Crisis.
Six-month moratorium on interest and repayments on new Microfinance Ireland COVID-19 loan
The new Microfinance Ireland COVID-19 loan includes an option for a moratorium on interest and repayments for the first six months. In addition, Local Enterprise Offices in every county are providing a range of business supports for micro-enterprises including business continuity and preparedness advisory supports connected to the COVID-19 outbreak. Loans range from 5,000 to 50,000 EUR with the first 6 months interest and repayment free.
Measures taken via the planning laws to support businesses, the public health response, and the planning system itself which are proposing to remove planning barriers for temporary medical facilities, allow hard hit restaurants to adapt, protect the supply chain, and preserve the integrity of decision making and public participation in the planning process.
National Covid-19 Income Support Scheme
With respect to potential income loss, this scheme will provide financial support to Irish workers and companies affected directly by the crisis. A temporary wage subsidy of 70% of take home pay up to a maximum weekly tax free amount of €410 per week to help affected companies keep paying their employees. This is the equivalent of €500 per week before tax. Workers who have lost their jobs due to the crisis will receive an enhanced emergency Covid-19 Pandemic Unemployment Payment of €350 per week (an increase from €203). Self-Employed will be eligible for the Covid-19 Pandemic Unemployment Payment of €350 directly from the Department of Employment Affairs and Social Protection (rather than the Revenue scheme).
These measures will be costly – with an initial estimated cost of €3.7 billion over a 12 week period.
Stability and Growth Pact – general escape clause
The European Commission presented a proposal to use the ‘general escape clause’, already provided for in the current Stability and Growth Pact, to reinforce emergency budgetary measures in response to the COVID-19 outbreak. This clause allows the suspension of the recommended budget adjustment for a Member State in the event of a severe economic downturn in the euro area or the European Union. It will apply to all countries, regardless of their fiscal situation. It will be up to the European Council to formally approve the activation of the budget clause. In the meantime, European Finance Ministers agreed that the conditions were fulfilled to activate the ‘general escape clause’ in order to strengthen the budgetary measures to fight the COVID-19 pandemic in an unprecedented way.
European Stability Mechanism – Enhanced Conditions Credit Lines
The Eurogroup has broadly supported granting Enhanced Conditions Credit Lines by the European Stability Mechanism (ESM), the eurozone’s permanent rescue fund which currently amounts to a total of €410 billion, to affected Member States. The instrument, which is still work-in-progress, would be aimed at all 19 eurozone members, however this does not mean that all euro-area members would use it. It would help an affected country to finance exclusively the fight against the pandemic and avoid the collapse of its economy by providing up to 2% of national GDP, provided that it commits itself to restoring fiscal stability afterwards. The Commission is also working on a temporary unemployment reinsurance scheme based on Article 122.2 of the Treaty (more to follow next week).
COVID-19 Temporary Framework for State Aid
The European Commission approved a series of aid schemes in various EU Member States under the ‘Temporary Framework’ for State Aid to support economies in the context of the COVID-19 outbreak. The Member States that have so far benefitted from the flexibility offered by the temporary framework for state aid are France, Germany, Italy, Portugal, Denmark, Luxembourg, Latvia and Spain. The UK has also had two schemes approved: one that enables guarantees covering 80% of the loan facilities for SMEs with a turnover not exceeding GBP 45 million and a second allowing for direct grants to support SMEs affected by the pandemic. The other measures approved range from guarantees on loans on preferential terms to help companies cover their immediate working capital and investment needs, to compensation to self-employed workers whose activities are affected by the pandemic, and to support the production and supply of medical devices such as ventilators, and personal protection equipment.
European Commission guidelines on protecting critical European assets and technology
The European Commission has issued guidelines aimed at ensuring an EU-wide approach to foreign investment screening in this time of public health crisis. The scope of the guidelines is to preserve EU companies and their critical assets, in areas such as health, medical research, biotechnology and infrastructures that are essential for security and public order, without undermining openness to foreign investment. Member States are empowered to screen foreign direct investments from non-EU countries on grounds of security or public order, and include situations for the protection of public health. Member States can impose mitigating measures such as; supply commitments to meet national and EU vital needs, or prevent a foreign investor from acquiring or taking control over a company.
National Emergency Response
The South African Government has announced a National State of Disaster and the National Coronavirus Command Council has decided to enforce a nation-wide lockdown for 21 days with effect from midnight on Thursday 26 March. The government has set up a Solidarity Fund with seed capital of R150 million from the state. The Fund will focus efforts to combat the spread of the virus, help South Africa to track the spread, care for those who are ill and support those whose lives are disrupted. The president has called on South African businesses, organisations and individuals, and members of the international community, to contribute to the fund, which aims to complement measures underway in the public sector.
The categories of people who will be exempted from this lockdown are health workers in the public and private sectors, emergency personnel, those in security services and other persons necessary for our response to the pandemic. It will also include those involved in the production, distribution and supply of food and basic goods, essential banking services, the maintenance of power, water and telecommunications services, laboratory services, and the provision of medical and hygiene products. A full list of essential personnel will be published.
The banking system will remain open, the JSE will continue to function, the national payment system will continue to operate, and the Reserve Bank and the commercial banks will ensure that bank notes and coins remain available
The South African Reserve Bank cut the repo rate by 100 basis points to provide relief to consumers and businesses.
Support to businesses in distress as a result of Covid-19
The South African Revenue Service will work towards accelerating the payment of employment tax incentive reimbursements from twice a year to monthly to get cash into the hands of compliant employers as soon as possible.
Tax compliant businesses with a turnover of less than R50 million will be allowed to delay 20% of their pay-as-you-earn liabilities over the next four months and a portion of their provisional corporate income tax payments without penalties or interest over the next six months.
Debt Relief Fund
The Department of Small Business Development has made over R500 million available immediately to assist small and medium enterprises that are in distress through a simplified application process. The requirement for funding is that businesses must be:
- B-BBEE compliant
- tax compliant
- 100% South African owned
- Able to demonstrate an employee base that is a minimum of 70% South Africans
- Priority will be given to companies that benefit women, young people, and people with disabilities.
The Industrial Development Corporation has put a package together with the Department of Trade, Industry and Competition of more than R3 billion for industrial funding to address the situation of vulnerable firms and to fast-track financing for companies critical to national efforts to fight the virus and its economic impact.
The Department of Tourism has made an additional R200 million available to assist SMEs in the tourism and hospitality sector who are under particular stress due to the new travel restrictions. Priority will be given to black-owned tourism businesses.
A number of additional measures will be implemented with immediate effect to strengthen prevention measures. Some of those measures include:
- South African citizens and residents arriving from high-risk countries will automatically be placed under quarantine for 14 days.
- Non-South Africans arriving on flights from high-risk countries we prohibited a week ago will be turned back.
- International travellers who arrived in South Africa after 9 March 2020 from high-risk countries will be confined to their hotels until they have completed a 14-day period of quarantine.
Support to people whose livelihoods will be affected
Any employee who falls ill through exposure at their workplace will be paid through the Compensation Fund. Using the tax system, the government will provide a tax subsidy of up to R500 per month for the next four months for those private sector employees earning below R6,500 under the Employment Tax Incentive. This will help over 4 million workers.
Residents have been directed to stay indoors at all times during this time, limiting movement strictly and not to leave their homes except to purchase food, basic essentials and medicines
Labour market measures
The Ministry of Human Resources & Emiratisation and the Federal Authority for Identity and Citizenship, have announced exemption of labourers whose work permits have expired from the medical tests. Work permits and residence visas will be issued and renewed automatically for labourers employed by companies and support service staff such as domestic workers as part of precautionary measures taken by the UAE to curb the spread of COVID-19.
The Cabinet, chaired by Sheikh Mohammed bin Rashid, Prime Minister and Ruler of Dubai, approved a decision to write off Dh86 million (US$23.4m) in electricity and water payments from malls, shops, hotels, hotel apartments and factories from April.
Policy updates to logistics and transport
Passenger flights in and out of the UAE were suspended for two weeks as fron from midnight on Wednesday, March 25, the General Civil Aviation Authority said. Air travel for logistical purposes including import and export needs are still available to adequately cover the needs of the UAE and its citizens.