European Commission approves £50 billion UK “umbrella” scheme to support the economy in the coronavirus outbreak

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New Delhi: 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.

The UK support measure

Following the approval of two UK State aid schemes to support small and medium-sized enterprises (SMEs) through grants and loan guarantees on 25 March 2020, the UK notified to the Commission a new “umbrella” scheme to support companies affected by the coronavirus outbreak under the amended Temporary Framework.

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:

a) Direct grants, equity injections, selective tax advantages and advance payments;

b) 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;

d) Support for coronavirus related research and development (R&D);

e) Support for the construction and upscaling of testing facilities to develop and test products useful to tackle the coronavirus outbreak;

f) Support for the production of products relevant to tackle the coronavirus outbreak.

The measure allows aid to be granted by UK authorities at all levels, including central government, devolved governments, local authorities and other bodies administering schemes involving state resources channelled through their own budgets.

The measure is targeted at SMEs and large corporates and applies to the whole territory of the UK. Aid is granted under the measure either directly or, if it concerns guarantees on loans, through credit institutions and other financial institutions as financial intermediaries.

The Commission found that the UK measure is in line with the conditions set out in the Temporary Framework. The scheme foresees a mechanism to ensure that where these programmes are channelled through commercial banks, the latter pass the advantage of the subsidised guarantee premium on to the companies that need support. The UK will ensure that the rules for cumulation of aid are respected across all measures under the Temporary Framework and across all granting authorities. Furthermore, aid may be granted under the measure only to undertakings that were not in difficulty on 31 December 2019. Finally, aid can be granted only until the end of this year.

The Commission concluded that the measures are necessary, appropriate and proportionate to remedy a serious disturbance in the economy of the UK, in line with Article 107(3)(b) TFEU and the conditions set out in the Temporary Framework.

On this basis, the Commission approved the measure under EU State aid rules.

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