August 04
2020
Anjum Shabbir
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25th March 2020
Competition & State Aid Covid-19

State aid: UK schemes to support SMEs affected by coronavirus outbreak approved by Commission

Two separate UK State aid schemes to support small and medium-sized enterprises (SMEs) in the context of the coronavirus outbreak have been approved by the Commission under the State aid Temporary Framework to support the economy in the context of the COVID-19 outbreak, adopted less than a week ago on 19 March 2020.

The aid includes a ‘Coronavirus Business Interruption Loan Scheme’, under which guarantees that cover 80% of loan facilities for SMEs with a certain turnover (up to GBP 45 million) to cover their working and investment capital needs; and a budget of GBP 600 million to provide direct grants to SMEs.

The Commission found that the UK schemes are in line with the conditions set out in the Temporary Framework. In particular, (a) the loan amount per company is linked to liquidity needs for the foreseeable future, (b) is limited to a maximum of six years, and (c) entails a guarantee premium at least as high as that in the Temporary Framework. It also noted that there were safeguards to ensure advantages were passed on to borrowers, and that lending would be used to cover short to medium term liquidity needs. The direct grants also do not exceed 800,000 euros per company, the threshold set out in the Temporary Framework, and would be linked to the market sector of the company.

The schemes will initially run until 30 September 2020, with the possibility for the UK to extend them until 31 December 2020.

The Commission concluded that the measures are necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State, in line with Article 107(3)(b) TFEU and the conditions set out in the Temporary Framework, and thus approved the measure under EU State aid rules.

Read the Commission’s press release for more information here.

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