Covid-19 and Government Recovery Plans

More progress this week across EMEA on Government plans for recovery, but lots of questions remain.  Our Public Policy Teams in London, Dublin, Brussels, Berlin, UAE, Saudi Arabia and Johannesburg are helping clients navigate Government recovery plans and below is a snapshot of these plans.  Should you wish to explore further or need advice on how to navigate these systems, please do get in touch. Contact: lucy.cronin@instinctif.com

• Prime Minister Boris Johnson has set a roadmap to easing lockdown measures and kickstarting some sectors of the economy. For now, the pathway only applies to England with the First Ministers of Scotland, Wales and Northern Ireland announcing their own pathways and maintaining tighter measures
• Currently being tested on the Isle of Wight, a UK-wide rollout of an NHS contact-tracing app is expected to be key to further easing of lockdown restrictions
• Easing of restrictions has seen a return to work for some in the construction and manufacturing industries and some retail outlets, once social distancing guidelines are maintained and people use homemade face coverings in enclosed spaces, where possible
• The Government has also updated its guidance so people can start buying and moving homes again
• The Government has announced five Ministerial-led taskforces to look at how sectors can re-open and provide secure guidelines where close contact is unavailable. The taskforces include:
  • Pubs, clubs and restaurants
  • Non-essential retail including salons
  • Recreation and leisure, including tourism, libraries, culture and entertainment, and sport
  • Places of Worship including faith, community and public buildings
  • International aviation

Stimulus and Economic Measures

• Chancellor Rishi Sunak has extended the Government’s Job Retention Scheme by four months until the end of October. The scheme will continue for all sectors and all four countries of the UK, with greater flexibility to support the transition back to work – for example, bringing back furloughed workers part time. From August, the Government will ask employers to start sharing the costs of salaries with further detail expected at the end of the month
• The Government’s Self-Employment Income Support Scheme has gone live with millions of self-employed workers able to apply for one-off grants up to £7,500
• The Chancellor has warned that it is very likely the UK is in a significant recession. It comes as Office of National Statistics data showed that the UK economy shrank by 2% in first quarter and shrank 5.8% in the month of March when the lockdown began with further contraction expected in Q2
• Leaked Treasury documents suggest the Government is considering tax rises, public spending cuts, green levies and public sector wage freezes as a way to meet the multi-billion-pound cost of the Covid-19 crisis

Ireland

Exit Strategy for business

• Beginning the exit strategy: The Taoiseach Leo Varadkar has told the Dáil (Irish Parliament) that he is confident the five-phase exit strategy will commence as planned from the 18 May. The exit strategy details how business may begin reopening and returning to work over the summer, with the final phase due to commence on 10 August
• Phase 1: Consequently, next week will see retail that is mainly outdoor and other essential indoor retail e.g. homeware, opticians, motor, bicycle & repair, office products, electrical, IT, phone sales & repair begin reopening, subject to social distancing requirements
• Work safety guidance: Taoiseach Leo Varadkar has also confirmed that the National Public Health Emergency Team will shortly make a recommendation advising people to wear “face coverings” in certain circumstances, including in workplace situations
• Timeline: This exit strategy will be reviewed every three weeks and the exact timing of progressing to the next phase is subject to change based on public health advice

Stimulus and Economic Measures

• The Irish Government launched a €40 million package of supports for Community and Voluntary Organisations, Charities and Social Enterprises that have been impacted by the Covid-19 pandemic
• Ireland’s largest employers’ group, Ibec, has called for a €15 billion reboot of the Irish economy to curb the effects of coronavirus, including calls for a three-month extension of the Government’s wage subsidy scheme
• Following a meeting between Taoiseach Leo Varadkar and five major retail banks – AIB, Bank of Ireland, Ulster Bank, Permanent TSB and KBC – attendees agreed to extend the option of loan payment-breaks for households and businesses until mid-Septmeber, at the earliest
• Current Government measures in place to help businesses to restart, reconnect and rehire staff include can be found here.

UAE

Exit strategy for business

• Further guidelines were released on 13 May, which allow trams and maritime transport to resume operations according to specific timelines, and public parks to open for gatherings of five people or less. In addition, sports and recreational activities will be permitted in open spaces for up to five people, including cycling, water sports and skydiving, however comprehensive preventive measures must be maintained while engaging in these activities
• Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi has ordered free Covid-19 tests for all UAE citizens and domestic workers
• All malls, hotels, restaurants and firms are required to keep staff and customer levels at 30%, with mandatory temperature checks and masks, while maintaining a minimal social distance of 2 metres
• Repatriation flights: stranded individuals who wish to return home must now apply for permission through a portal called Twajudi and wait for approval. On 9 May, UAE residents boarded the first bookable repatriation flight with many more expected to come. Emirates airlines is operating inbound flights from Germany and the UK, while Etihad offers a schedule from 12 destinations
• Gym and fitness centres: all still closed until further notice

Stimulus and Economic Measures

• The UAE has announced a two-phase plan to shape the economy in a post-Covid-19 world
  1. A short-term phase, which includes the gradual opening of the economy and businesses while adhering to precautionary measures, providing stimulus plans of total AED 282.5 billion to the sectors most affected by the crisis, supporting SMEs, and linking funds to beneficiaries through effective schemes and plans
  2. A more long-term stimulus package to accelerate recovery, advance growth, transform challenges into opportunities to achieve sustainable economic growth, and encourage investment in sectors with high potential, most notably the digital economy
• The UAE is drafting a national strategy for managing future diseases, known as “Disease X”, and will be based on lessons learnt from the Covid-19 pandemic. The strategy will focus on improving the efficiency of health services and embracing cutting-edge technologies

Saudi Arabia

Exit Strategy for business

• The Saudi Government announced a return to a Kingdom-wide 24-hour curfew to be imposed from 23 – 27 May following the end of the holy month of Ramadan, and during the Eid Al Fitr public holiday. As the number of cases continues to rise, the Government is concerned about the potential of dealing with a massive number of Covid-19 cases due to family gatherings that take place during the national holiday. Until then, businesses will remain open and people will be able to move freely from 9am – 5pm.
• There is increased scrutiny of migrant workers’ camps as more Covid-19 cases are being recorded. Disease continues to spread through cramped labour housing where many share bunkbeds in tightly packed bedrooms. According to the Saudi Health Ministry, non-Saudi residents comprised 76% of the more than 3,000 new confirmed coronavirus cases last week
• The Hajj pilgrimage season, due to begin in late July, might be cancelled this year due to coronavirus concerns. The event usually attracts up to 2.5 million Muslims from all over the world for 10 to 20 days of prayers and rituals in the holy city of Mecca

Stimulus and Economic Measures

• In response to falling oil prices and the Covid-19 pandemic, the Government has tripled its value added tax (VAT) as part of austerity measures that also included the suspension of its cost of living allowance in a bid to shore up state finances. The new VAT rate is 15% and will go into effect on 1^stJuly
• The Saudi Government have announced a wave of arrests in an anti-corruption campaign targeting kickbacks in the housing and healthcare sectors. In media reports, the Government stressed its commitment to transparency in contracts and to maximize financial efficiency in handling the Covid-19 pandemic

EU

Exit Strategy for business

• The EU Commission published its much-anticipated guidelines for tourists, travellers and businesses. The package includes an overall strategy; a common approach to restore free movement; a framework to support transportation; a recommendation on travel vouchers; and criteria for restoring tourism. The Commission proposes a flexible approach taking into account epidemiological as well as socio-economic conditions
• The EU Commission has asked Schengen countries to extend the restriction on non-essential travel to the EU for another 30 days, until 15 June. The EU executive stressed that opening internal borders remains a priority

Stimulus and Economic Measures

• Commission President Ursula Von der Leyen has shared first details about the future European Recovery Plan, which is currently being developed alongside the proposal for the EU’s long-term budget. Von der Leyen said that the climate and digital agendas will be at the heart of the recovery plan. She did not reveal the size of the recovery instrument nor the exact way in which it will be funded as negotiations are still underway. The European Parliament has demanded a recovery package to the tune of €2 trillion
• The Commission has proposed a postponement of the implementation of several tax measures in response to the temporary difficulties faced by business and tax administrations across the bloc. The proposal includes a three-month extension of the deadline for exchange of information on financial accounts whose beneficiaries are tax residents of another Member State, as well as a six-month delay of the entry into force of the new VAT rules for cross-border e-commerce

Germany

Exit Strategy for business

The German Government has decided further measures to reduce the effects of the coronavirus pandemic:

• Decisions to ease border controls: Controls on the German border will be gradually reduced from this Saturday, 16 May. According to the agreement, Germany had signed contracts with France, Austria and Switzerland to ease the controls in a first step and to end them completely as of 15 June.

• First concept Corona-App visible: The two companies commissioned by the German Government to develop the so-called Corona App, SAP and Deutsche Telekom, have released a first version of the application. Interested parties have the ability see how the mobile application is structured and how it should work.

The German Chancellor Angela Merkel pointed out the successes in the fight against the coronavirus during the Government questioning in the German parliament. Thanks to great cohesion and enormous efforts, it has been possible to slow down the spread, she stated. Merkel noted that when returning to jobs, schools and sports clubs, it is now important to respect the new basic rules.

Stimulus and Economic Measures

• Travel industry demands state aid: The state should support the travel industry financially due to the economic collapse, according to industry. The initiative “Save the Travel Agencies” is calling for a rescue package, immediate financial aid from the Federal Government, and immediate and non-repayable aid as compensation for the professional closure.

• German Government approves Social Protection Package II: The Federal Government has initiated improvements in short-time work and unemployment. Short-time workers will receive more money and they will be allowed to earn additional money in all professions, starting in May. The period of entitlement for unemployed persons will be extended.

South Africa

Exit Strategy for business

• On Wednesday, 13 May, President Ramaphosa announced that most of the country would be moved to Level 3 of the Risk Adjusted Strategy commencing from 1 June
• Although all of South Africa will remain under Level 4 lockdown until the end of May, a couple of regulations are set to change, and these changes will be announced during the week commencing 18 May
• The President also stressed that in some of the regions where infection rates remained high, Level 4 lockdown restrictions may still apply
• In the automotive industry, motor dealers reopened their doors on Monday 11 May, with continued confusion on the conditions for reopening and whether they could sell bakkies and commercial vehicles
• In the construction sector, industry experts are predicting that there will be no growth for the next 2 to 3 years
• Sanral (South African National Roads Agency) anticipates that all their projects will proceed for the year as the industry is operating in level 4 lockdown regulations

Stimulus and Economic Measures

• As part of the plan to improve liquidity and reduce market volatility in the financial markets, the Reserve Bank of South Africa bought more than R11bn in government debt securities in April as part of a bond-buying programme
• SARS forecast that tax collections could be down 15-20% for the year and this translates to a R285bn gap that could hamper the government’s budget deficit
• The Land and Agricultural Development Bank has joined the list of State-Owned Entities that are on the verge of defaulting on debt if the government is unable to provide a bailout
  • Another is state-owned defence firm, Denel, which was unable to make payments to its employee pension fund or meet some of its tax obligations, including UIF