Covid-19 and Government Recovery Plans

As Governments across EMEA pivot from crisis response to recovery, so do we.  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

Exit Strategy for business

• The UK Government is expected to unveil its exit strategy and pathway to easing lockdown measures with a national address from the Prime Minister on Sunday evening followed by a statement to Parliament on Monday. Having begun consultation with industry and employee groups as well as unions, it is expected to be a phased easing over the long-haul with Government Ministers warning there’s no quick fix.
• It’s expected the first phase will see some non-essential retailers given the green light to open and businesses asked to plan for a staggered return to work. The Government will likely try and persuade business to restart work in some sectors that weren’t asked to shut down including construction sites, takeaway restaurants and drycleaners. Employers are expected to be told to implement staggered start and finishing times and employees encouraged to keep working from home where they can.
• Despite mixed reports, it’s understood the PM is keen to outline a staggered reopening of schools from late May or early June acknowledging that one of the big challenges for businesses preparing for their employees to return to work will be parents who are currently home schooling.
• Though pubs and restaurants are likely to be the last to reopen their doors, there is some speculation that pubs with beer gardens may be able to open if social distancing could be maintained.

 Stimulus Packages

• With no new stimulus measures announced in the past week, the Government’s focus remains on its current measures including the future of its Job Retention Scheme which saw 800,000 businesses take advantage of the scheme. Designed to support and protect businesses and employees in sectors forced to close in the face of the lockdown and other social distancing restrictions, it’s believed nearly 25% of all employees in Britain have been furloughed.
• Presently, the scheme is due to end in late June; however, amid industry warnings that millions of jobs would be at risk if not extended, Chancellor Rishi Sunak is considering what he can do to extend the furlough scheme for some sectors that may not be fully operational for many months, especially hospitality, manufacturing and retail. He has given assurances to business that there won’t be a cliff-edge to the scheme.
• The Bank of England held off from further stimulus measures on Thursday but said it was ready to take more action to counter the country’s biggest economic slump in over 300 years, caused by the coronavirus lockdown. It kept its benchmark interest rate at an all-time low of 0.1% and left its target for bond-buying, most of it British government debt, at £645 billion.

Ireland

Exit Strategy for business

• A five-phase exit strategy has been published, detailing how business may begin reopening and returning to work. The first phase of the strategy will begin on 18 May, with the final phase on August 10. By that stage, it is hoped the economy will almost be fully reopened with all sectors returning to work. The ‘phased’ approach is designed to ensure that businesses can adequately adjust to increasing activities in a safe manner.
• Reopening of Businesses: In Phase 1, retail that is mainly outdoor and other essential indoor retail e.g. homeware, opticians, motor, bicycle & repair, office products, electrical, IT, phone sales & repair open can reopen, subject to social distancing. However, all other ‘non-essential retail’ and ‘high risk services’ e.g. hairdressing will be opened during later stages. Please refer to pg. 11 for full details.
• Employees Return to Work: the initial focus will be to allow a select number of sectors that are, ‘essential to facilitate economic activity’ e.g. transport to return to work. The key point being, not all the population should go back to the workplace at the same time.
• In other businesses where employees work outdoors or can comfortably maintain a 2 metre distance from one another at all times, returning to the workplace may be provided for throughout various stages. However, all workers who can work remotely are being advised to do so until 10 August. Please refer to pg. 10 for full details.
• This exit strategy will be reviewed every three weeks and we may see some changes being made as time goes on.

Stimulus Packages for business

• The Irish Government has announced further measures to support businesses impacted by COVID-19 (Official Press Release)
• As Ireland begins reopening its economy, these measures are designed to help Ireland’s businesses to restart, reconnect and rehire staff who have been laid off or furloughed and include:
  • a €10,000 restart grant for micro and small businesses based on a rates/waiver rebate from 2019
  • a three month commercial rates waiver for impacted businesses
  • a €2 billion Pandemic Stabilisation and Recovery Fund within the Ireland Strategic Investment Fund (ISIF), which will make capital available to medium and large enterprises
  • a €2 billion COVID-19 Credit Guarantee Scheme to support lending to SMEs for terms ranging from 3 months to 6 years, which will be below market interest rates
  • the ‘warehousing’ of tax liabilities for a period of twelve months after recommencement of trading during which time there will be no debt enforcement action taken by Revenue

• a commitment to local authorities to make up the rates shortfall, so that local authorities can continue provide full services to the public

• Details on which entity to contact with respect to each measure can be found here.

UAE

Exit Strategy for business

• All businesses must take the necessary measures and precautions to be in compliance with government guidelines and protocols prior to reopening, and continue to do so on resuming their operations.

• Repatriation flights: commercial flights for Emirates, Etihad, FlyDubai and Air Arabia were grounded on 24 March, but UAE airlines are now operating outbound repatriation flights for those in the country trying to get home. The majority of repatriation flights will only accept passengers who are permanent residents or citizens of the destination.

Stimulus packages

• Sami Al Qamzi, Director General for the Department of Economic Development (DED), announced that preventing the loss of jobs and ensuring the sustainability of businesses is a key focus for the government, with an existing AED 1.5 billion stimulus package to support companies across Dubai
• To date, most financial support has been provided by the UAE Central Bank, which announced stimulus worth AED 256 billion ($70 billion) to ease pressure on businesses and support banks’ liquidity

SAUDI ARABIA

Exit Strategy for business

• Partial easing of the lockdown was implemented 29 April, except for the holy city of Mecca until 13 May. Individuals are allowed to leave their home from 9:00 to 5:00 all seven days of the week. However, they are not allowed to travel between cities and provinces.
• Certain businesses that cannot commit to strict social distancing guidelines are exempt from the partial easing. The exception includes beauty salons, barber shops, fitness clubs, recreational centers, cinemas, restaurants, cafes and sports facilities
• All firms are expected to keep staff levels inside of offices at 50%, start the day with temperature checks, and wear masks and gloves during their time at the office – while maintaining a minimum social distance

• Repatriation flights: All sea, air and land ports have been closed. In early April, the government launched an online platform to coordinate the return of Saudi nationals’ home. All regular travel remains shut down

Stimulus packages

• The government announced USD 32 billion in aid to business impacted by the crisis, and the decrease in oil prices. It includes postponement of tax payments and exemptions of government levies. The package includes the extensions of various types of visas free of charge, fees on hiring non-Saudi expats, postponing the payment of value-added tax and income tax for three months, and financial support for salary payments of Saudi staff members
• The Minister of Finance, Mohamed Al Jadaan, was authorized by the King to approve government lending and other forms of financing as well as exemptions from payments until the end of 2020

EU

Recovery plans

• EU leaders have tasked the European Commission with drafting a recovery plan for Europe. The mandate was given following long and difficult negotiations. Precise details on the size and content of the package are still being discussed as differences remain significant, most notably over whether the recovery fund should channel the resources via loans or grants.
• The European Commission adopted an “emergency”’ banking package in order to facilitate bank lending to households and businesses across the EU. The package consists of an interpretative communication on the EU’s accounting and prudential frameworks as well as targeted “quick fix” amendments to the EU Capital Requirements Regulation aimed at maximising the ability of banks to lend and absorb losses related to the pandemic.
• The European Commission released its Spring 2020 Economic Forecast, which projects that the EU economy will contract by 7.5% in 2020 as a result of the COVID-19 pandemic and the resulting recession. If correct, the forecast would mean the deepest recession in EU history.

Exit strategy

• The European Agency for Safety and Health at Work (EU-OSHA) in partnership with the European Commission published its guidance for a safe return to the workplace. The guidance covers a number of areas including risk assessment and appropriate measures, involving workers, taking care of employees who have been ill and planning for the future.

Germany

Exit Strategy for business

• Following intensive negotiations between the federal government and the federal states (Länder) the parties set out the path to a gradual opening. Contact restrictions still apply (keeping a minimum distance of 1.50 m and wearing a mouth and nose protector – especially in public transport and in shops). The contact restrictions are valid until 5th June. However, in the future it will also be possible to meet people from another household. This does not affect decisions already made by individual federal states.
• Reopening of shops: Under special hygiene and protection requirements, shops are allowed to reopen, regardless of their size.  It is important that a maximum number of persons (customers and staff) in relation to the sales area is not exceeded.
• Remote work: Companies are encouraged to enable home-office for their employees.

Labour Minister Hubertus Heil (SPD) also wants to anchor a right to ‘home office in a law tentatively in autumn

• Hospitality industry: The federal states can decide on the gradual opening of the catering and accommodation sectors for the purpose of tourism (as such: hotels, pensions and holiday flats).

• Reopening of other businesses: e.g. conventions, clubs, bars and other service providers are again subject to the decision of the federal states (Länder)
• Restrictions on int. travel:  As the conditions for a safe travel abroad have not yet been met, the German government is extending the global travel warning for non-essential tourist travel until June 14th.

Stimulus packages

An important and re-iterated goal of the federal government is to stabilize economic development and to secure jobs. Therefore two relief measures were enacted.

• Reduction of VAT for restaurants: Tax relief for the catering industry. For example, the VAT rate for food in the catering industry is to be lowered from 19 to 7 percent. The regulation applies from 1st July 2020 until 30th June 2021.

Aid for short-time workers: The additional payments given to short-time workers between 1st March 2020 and 31st December 2020 will remain tax-free. Provided that the combined amount of the additional payments and short-time working compensation does not exceed 80 percent of the lost pay. If more is paid, only the portion exceeding this amount is taxable

South Africa

Exit Strategy for business

• The government of South Africa announced plans for a partial reopening of the economy on 1 May 2020.  This included a 5 level risk adjusted strategy that lifts COVID-19 restrictions in phases, with only certain industries allowed to operate at each stage.  During initial stages of lockdown, South Africa was at Level 5, it has now moved to Level 4.

It is important to note that while the government would like to open the economy and the schools as expeditiously as possible, there is no set time-plan for that re-opening of the economy.  The decision to move to Level 3 (or even back to Level 5) will depend on the on new case rate and healthcare services preparedness to deal with them.  This strategy will be applied at national, provincial, district and municipal level and may even result in some provinces or municipalities being on different levels.

• Reopening of Businesses: Currently, at Level 4, South Africa has seen a move to allow more businesses to return to work.  The businesses now able to operate include:
  • Agriculture
    • All agriculture, hunting, forestry, fishing and related services, including the export of agricultural products permitted
  • Energy & water
    • All electricity, gas and water supply
  • Manufacturing
    • Manufacture of products that are permitted to be sold under Level Four can begin
    • Petroleum smelters, refineries and furnaces, permitted scaling up to full employment
  • Construction and related services (inc. tradespeople):
    • Only as it relates to public works projects (including water, energy, sanitation, road and bridge projects) or critical maintenance and repairs
  • Wholesale and retail trade, covering stores, spaza shops, eCommerce and informal traders
    • These may operate in a limited fashion and citizens are not allowed to purchase anything that does not fall within what the government deems essential to survival.  In essence this means no purchasing of alcohol, tobacco, clothing or soft furnishings that aren’t specifically for winter, non-educational books and equipment, automotive other than for essential workers etc.
  • Financial and business services
    • Financial services and private security services may operate. For the main, services the enable the operation of other Level Four critical services may operate.
  • Mining and Quarrying
    • Coal and open cast mining are operating at full staff complement. All others at around 50%
  • Transport and Storage
    • Ocean and air transport is only permitted for cargo
    • Public transport set to limited time windows and passenger restrictions

• Employees Return to Work: While there is a move to get people back to work, most industries that are allowed to operate will be doing so with a small staff complement.  Coal and opencast mining is the exception, where 100% of the staff are back at work.  Manufacturing as it relates to core services, will be able to scale up to 50% employment, but non-essential will only be able to scale to 20%.  Private households that have members who are permitted to return to workplaces during Level 4, can allow their domestic workers to return to work.
• The President has said that all workers who can work remotely must do so for the foreseeable future
• A private sector group, Business for South Africa, has said the country’s GDP may contract by between 10% and 16.7% this year despite government stimulus efforts, placing between 1 million and 4 million formal and informal sector jobs at risk.

Stimulus Packages for business

There have been no new stimulus announcements since the last update. However, of interest is that the SA Chamber of Commerce and Industry’s Business Confidence Index, slumped to 77.8 in April from 89.9 in March.  This is the lowest level ever for the SACCI BCI since its inception in 1985.