Comuniq.EU – Support to the UK

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by Keith Zahra

The European Commission has approved a £50 billion (approximately €57 billion) “umbrella” UK scheme to support small and medium-sized enterprises (SMEs) and large corporates in the United Kingdom affected by the coronavirus outbreak. The scheme was approved under the State aid Temporary Framework adopted by the Commission on 19 March 2020, as amended on 3 April 2020.

According to the UK Withdrawal Agreement, during the transition period, the entire body of EU law continues to apply to, and in, the UK as if it were a Member State. This includes all EU rules relating to State aid.

The measure is a UK-wide National Temporary Framework for State aid, with an estimated budget of £50 billion, and allows for the provision of aid in the form of Direct grants, equity injections, selective tax advantages and advance payments; State guarantees for loans subject to safeguards for banks to channel State aid to the real economy; c) subsidised public loans to companies with favourable interest rates; Ssupport for coronavirus related research and development (R&D); support for the construction and upscaling of testing facilities to develop and test products useful to tackle the coronavirus outbreak and support for the production of products relevant to tackle the coronavirus outbreak.

SMALL BUSINESSES

The European Commission has allocated €1 billion from the European Fund for Strategic Investments (EFSI) that will serve as a guarantee to the European Investment Fund (EIF), part of the European Investment Bank Group.

This will allow the EIF to issue special guarantees to incentivise banks and other lenders to provide liquidity to at least 100,000 European SMEs and small mid-cap companies hit by the economic impact of the coronavirus pandemic, for an estimated available financing of €8 billion. This will serve as an immediate relief to hard-hit SMEs, with money able to flow already in April. It is part of the package of measures announced by the EIB Group on 16 March designed to rapidly mobilise support for Europe’s SMEs and mid-caps.

One of the immediate economic consequences of the coronavirus pandemic is the sudden lack of liquidity affecting small and medium-sized businesses. These companies are typically the most affected in a crisis, and it is essential to support them with adequate liquidity so they can survive the crisis. However, in a situation of liquidity crunch banks are not incentivised to lend SMEs money due to the sudden increase in perceived risk, therefore these guarantees will help cover this necessity.

The EIF is offering to the market dedicated EFSI-backed guarantees to contain the impact of the pandemic on small and medium sized enterprises and small mid-cap companies.

Keith Zahra

CiConsulta – EU Affairs

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