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EU Responds to COVID-19 Spread with SME Funding

As Europe steps up measures to contain the spread of COVID-19, EU and UK negotiators have decided not to hold the second set of talks in London as planned. Both parties are considering alternative methods, such as videoconferencing. Concerns are arising, however, regarding the effectiveness and speed of such measures, especially as all non-essential European Commission staff have been instructed to work from home. While these plans play out, the EU is preparing measures to support citizens through the pandemic, including emergency funding for SMEs.

The EU is dedicated to finding a coordinated response to the outbreak. In direct measures to address the virus, the Commission will mobilise €140 million of public and private funding for research on vaccines, diagnosis and treatment in addition to relaxing state aid rules and assembling a team of epidemiologists and virologists from difference Member States to provide guidelines on a European level.

The Commission has expressed its grave concern over the effect shop closures and social distancing measures will have on small businesses. In order to bring relief to hard-hit SMEs, the EU will draw upon its budget to help these companies with liquidity as a complimentary measure to those taken at a national level. The Commission also intends to redirect €1 billion from the EU budget as a guarantee to the European Investment Fund (EIF) to incentivise banks to provide liquidity to SMEs and midcaps and provide credit holidays to the existing debtors that are negatively affected.

The UK’s departure from the EU on 31 January 2020 automatically ended its membership of the European Investment Bank (EIB) Group, of which the EIF is a part. This means that the UK is no longer eligible for future initiatives. The EIF does, however, have financial intermediaries in the UK, and both Barclays and Scottish Enterprise are minor shareholders. Furthermore, the EIB does invest in projects outside the EU, with caveat of doing so to further EU policy goals. While EIB/EIF UK funding has significantly decreased since the 2016 Brexit vote, it is possible that UK small businesses could benefit from the EU’s emergency funding.

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