Managing Covid-19

International guide | Navigating government COVID-19 support measures

Published on 18th May 2020

Although governments are beginning tentatively to ease lockdown restrictions, for many, it will take some time before trading returns to anything approaching normal levels and employees temporarily not needed can be brought back into the workforce. In the meantime, there remains a need for finance to provide working capital.

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In this international guide, our experts provide an overview of the government support measures that are available to businesses, across a number of jurisdictions, in relation to: finance and funding; and people and workforces.

Finance and funding

Recognising that for many businesses, the most pressing issue in the short term is the availability of working capital, a common response by governments is to establish schemes to unlock finance that can be repaid when trading resumes. Typically, the state will guarantee a large proportion of loans – in France, for example, the government guarantees 90% of the loan for smaller businesses and 80% for larger businesses; the Spanish scheme guarantees up to 80% of loans to SMEs and the self-employed, while for other businesses this is 70% for new loans and 60% for the renewal of existing facilities.

The UK scheme takes the distinction between different sizes of business a step further with five different schemes, each aimed at a different segment of the market and coming with different terms and conditions. The points of difference include the size of the loan that can be applied for, the level of government guarantee (up to 100% for the smallest businesses), and whether the loan attracts any fees or interest during the first 12 months.

As well as support with financing, businesses can benefit from tax concessions. In some countries, such as the Netherlands, rules have been relaxed around the deferral of taxes (including income tax, corporation tax, VAT and wage taxes), and the interest accruing on payment defaults has been lowered (from 4% to 0.01%). Similarly, Germany has focussed its tax relief on the short-term deferral of tax payments and pre-payments, and temporary forbearance by tax authorities.

With the availability, eligibility and terms varying not just by country but in some cases (such as Belgium, Germany and Spain) between different regions within the country, those with operations spanning multiple territories will need to consider which schemes they can, and should, take advantage of.

Read more on finance and funding.

People and workforces

Governments have recognised a responsibility to assist the businesses and individuals that have been left unable to work as a result of the virus, and measures to combat it. State support typically involves subsidising the wages of employees who are not required to work, but there are significant variations in how the schemes operate in different countries.

Germany is among the countries that already had an arrangement ('short-time working') of this nature, although the requirements have been relaxed so that it is more widely available. Short-time working is one of the more flexible systems, allowing employers (subject to eligibility criteria) to reduce employees' hours to the level needed, and adjust their pay accordingly. Workers are entitled to 60% of the net pay difference (or 67% for those with children).

The corresponding scheme in the UK applies to workers that have been temporarily taken out of the workforce (or 'furloughed'), for at least three weeks. The business can claim 80% of the cost of its furloughed employees. The UK government has recently announced that this scheme will be extended to 31 October 2020 but in a modified form from August 2020 that will be intended to encourage a return to the workplace (further details of which are awaited).

These schemes are intended to apply to businesses that have been impacted by the coronavirus and some, such as the Dutch 'NOW' scheme, are subject to specific financial tests: Dutch companies must have experienced a turnover drop of at least 20% over a period of three months, and then receive compensation on a sliding scale (from 22.5% of wages to 90% of wages, where the turnover loss is 100%).

Read more on people and workforces.

If you would like to discuss the implications for your business, please contact one of the experts listed below, or your usual Osborne Clarke contact.

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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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