Business continuity and Covid-19 – how Governments are reacting across Europe

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

United Kingdom

UK Government has announced quite a number of support schemes for business and employees such as HM Treasury’s financial support package.

Key features include:

• Government-backed loans worth £330 billion – equivalent to 15% of GDP – to help businesses which need access to cash.
• It also included a package of tax cuts and grants worth more than £20 billion.
• The support will be delivered in two main forms. Larger firms will be able to access a lending facility through the Bank of England, which Sunak said would guarantee “low-cost, easily accessible” commercial loans.
• The new COVID-19 Corporate Financing Facility means that the Bank of England will buy short term debt from companies. This will support companies which are fundamentally strong, but have been affected by a short-term funding squeeze, enabling them to continue financing their short-term liabilities. It will also support corporate finance markets overall and ease the supply of credit to all firms.
• For small- and medium-sized businesses, the government will extend the new business interruption loan scheme announced in the budget so that businesses can borrow up to £5 million with no interest due for the first six months.
• The package of support also included a three-month mortgage holiday for homeowners.
• Small firms in the retail, hospitality and leisure sectors with a rateable value of less than £51,000 will be eligible for cash grants of up £25,000
• Relief from business rates will be extended to all shops, pubs, theatres, music venues, restaurants and other firms in the sector, meaning they will not pay the tax for an entire year.
• Cash grants of £10,000 would be available to the smallest 700,000 businesses in the country.
• Sunak also revealed that a specific support package was under discussion with the Transport Secretary for airlines and airports, and that additional measures may be introduced for other sectors.

Further measures and details of the schemes will be announced over the coming days and weeks.

The Bank of England working in close liaison with the Government have reduced interest rates to an historic low of 0.1%. The Bank also announced another £200bn in bond buying under the quantitative easing programme, and the extension of the term funding scheme, which encourages banks to pass on the benefits of interest rate cuts to companies and households.

The Government has also set out new emergency powers:

Under the proposed legislation, airports and ports could be shut and law enforcement agencies will be given the power to detain people and put them in appropriate isolation facilities if necessary.

• The legislation will allow regulations to be relaxed to allow some medical students and retired clinicians to treat patients.
• Recently retired staff will be able to return to work without any negative impact on their entitlements
• Special insurance cover will be provided for staff caring for staff outside their day-to-day duties
• Paperwork will be reduced to help doctors discharge patients more quickly
• Extra employment safeguards for volunteers to allow them to pause their main jobs for up to four weeks
• The process of arranging funerals could be fast-tracked as part of efforts to “manage the deceased in a dignified way” should the UK experience “excess deaths”.
• More court hearings could take place by phone or video
• The Border Force could temporarily suspend operations at airports and other transport hubs if there are insufficient resources to maintain border security.

Germany

In addition to a number of health measures the German government has also decided a package of measures for the economy. The German Federal Government is using its financial strength to manage the effects of the coronavirus epidemic and to minimize economic damage. In cooperation with representatives of the Länder (Federal States), the Federal Ministry of Finance has set up a safety net for companies. Additional funds of around 1.1 billion euros were quickly made accessible within the federal budget. See Protective shield for employees and companies by Federal Finance Minister Olaf Scholz and Federal Economics Minister Peter Altmaier on combating the corona epidemic :

• Billion-dollar protection shield for businesses and companies: New liquidity measures, unlimited in volume, are intended to protect companies and employees. Smaller companies and freelancers can also benefit from this, for instance from the ERP start-up loan .
• Making short-time allowance more flexible: Reduction of the quorum of employees affected by absenteeism in the company to up to 10 percent, partial or complete renouncement of building up negative working time balances, short-time allowance also for temporary employees and full reimbursement of social security contributions by the Federal Employment Agency.
• Tax liquidity support for companies: The granting of deferrals is being simplified, advance payments can be adjusted more easily, enforcement measures (e.g. account seizures) or late payment surcharges will be waived until 31 December 2020 as long as the debtor of a tax payment due is directly affected by the impacts of the coronavirus.
• For companies that find themselves in financial difficulties as a result of the current situation, the obligation to file for insolvency will be suspended until 30 September 2020.

Ireland

National Action Plan

Alongside the adoption of emergency legislation to assist those who have lost their jobs as a result of Covid-19, the Covid-19 National Action Plan was approved this week by the Cabinet Committee on Covid-19. The full action plan can be read here https://www.gov.ie/en/publication/47b727-government-publishes-national-action-plan-on-covid-19/. A number of measures have been announced to support businesses which include:

1. The Credit Guarantee Scheme which supports loans up to €1 million for periods of up to 7 years. Applications can be made to AIB, Bank of Ireland and Ulster Bank. Microenterprises can access COVID-19 loans of up to €50,000 from MicroFinance Ireland. Loans are available at an interest rate of between 6.8% and 7.8%. Businesses can apply through their Local Enterprise Office or directly at ie.
2. The €200m SBCI COVID-19 Working Capital Scheme for eligible businesses will be available within the next week. Maximum loan size will be €1.5 million (first €500,000 unsecured) and the maximum interest rate will be 4%. Applications can be made through the SBCI website at gov.ie. SBCI COVID-19 Working Capital Scheme FAQs
3. A €200m Package for Enterprise Supports including a Rescue and Restructuring Scheme is available through Enterprise Ireland for vulnerable but viable firms that need to restructure or transform their business.

See the Irish Government checklist on Business Continuity Planning which provides a checklist of preparatory actions for businesses in responding to COVID-19.

On tax liabilities the Revenue Commissioners have undertaken to “engage with any viable business that experiences temporary cashflow difficulties, including difficulties arising from exceptional circumstances such as the COVID-19 (Coronavirus) outbreak.” See www.revenue.ie. Revenue has also posted advice for businesses experiencing trading difficulties as a result of COVID-19. This includes information on tax returns, the application of late payment interest, debt enforcement, tax clearance and customs.

European Union

Liquidity measures supporting firms and SMEs

The EU budget will deploy its existing instruments in order to support hard-hit SMEs with liquidity, complementing measures taken at national level in order to facilitate immediate relief to companies facing uncertainty. €1 billion will be made available from the EU budget as a guarantee to the European Investment Fund (EIF) in the coming weeks to support approximately €8 billion of working capital financing and help at least 100,000 European SMEs and small mid-cap firms. Moreover, credit holidays, allowing for delayed repayments of loans, will be implemented for affected companies, alleviating the strain on their finances.

ECB Pandemic Emergency Bond Purchase Programme

The European Central Bank announced it would be spending €750 billion in bond purchases in an attempt to stabilise sovereign debt markets. The Pandemic Emergency Purchase Programme will buy government and corporate bonds and will be an addition to the €120 billion asset purchases announced by the ECB last week. It will also consider relaxing some of the self-imposed restrictions on bond purchases, with the aim of helping countries like debt-laden Italy whose bonds yields have soared due to the coronavirus crisis. Greek bonds will also be included within the ECB’s asset purchases.

Coronavirus Response Investment Initiative

The European Commission proposed to direct €37 billion under the cohesion policy to the COVID-19 outbreak and to implement this fully in 2020 through exceptional and accelerated procedures, under the newly established Coronavirus Response Investment Initiative. This means the Commission proposed to relinquish this year its obligation to request refunding of unspent pre-financing for European structural and investment funds currently held by Member States. Moreover, up to EUR 28 billion of as of yet unallocated structural funds from the existing national envelopes will be fully eligible for fighting the crisis, providing Member States with the needed sources of funding.