Business promotion measures during the corona pandemic – experiences and lessons learned
Large sections of the Swedish business community have had their worst fears confirmed and in many cases are experiencing their worst crisis since the Second World War.
The COVID-19 pandemic came as a total surprise and the consequences were significant. Extensive support initiatives were put in place to mitigate the economic and social impacts of the pandemic.
In this report, Growth Analysis provides a coherent and comprehensive picture of the efforts that have been made to mitigate the economic consequences of the corona pandemic for the business community. The aim is also to see what insight and knowledge, if any, that can be gained from lessons learned and used to combat future crises. Some efforts are, however, still ongoing, and others have just been launched, which somewhat limits the possibilities at this stage. The report has a broad focus and examines four different planning levels – local, regional, national and EU. The aim is to provide a coherent and comprehensive picture of efforts targeted at the business community, at local, regional, national and EU level, focusing on:
- Which initiatives have primarily been developed and implemented?
- How the work has been organised or structured?
- What lessons can we learn?
Various methods have been used to gather knowledge on the efforts of the different planning levels, such as web surveys, interviews, document studies and data analysis. It quickly becomes clear how the pandemic is impacting the business community in different ways, regardless of the level. There are major differences between both sector and region, but also within sectors, municipalities and regions.
When it comes to monitoring the pandemic, the municipalities are in prime position
The municipalities are often described as the stakeholders closest to companies, monitoring the effects of the pandemic on the business community “from the front row”. Among the most commonly occurring municipal initiatives, we find vouchers given to municipal employees for local use, extended outdoor dining periods and/or the simplified administration of such, deferment of payments, information collated for companies in respect of rules, support and advice facilities, and encouragement from other municipalities when implementing initiatives.
As to which initiatives municipal stakeholders consider to be of the greatest benefit to companies, the option of vouchers for municipal employees for local use clearly comes first (57 per cent). The initiative to enhance communication with companies in respect of rules, support, advice etc., has also been widely welcomed. In terms of the size of the company (number of employees), it is mainly micro-enterprises (0 to 9 employees) and small enterprises (10 to 49 employees) that have taken advantage of the initiatives. In terms of industries, the hotel and catering industry, trade, motor vehicle and motorcycle repair, and culture, entertainment and leisure have been the main users of the initiatives.
The lessons are, to a large extent, to gain a better understanding of the local business community and the situation of companies, as well as a greater understanding of, and preparation for, a similar situation in the future. Many of the respondents agree that the targeted efforts should have been implemented at an earlier stage. It is also clear that, through their efforts, municipalities have played an important role in helping companies benefit from national and regional initiatives.
The regions are backing up and resetting
At regional level, the regions initially mitigated the panic and uncertainty of companies with efforts such as company helplines and advice services. The next stage was to develop projects and initiatives aimed at resetting. A broad range of efforts have been implemented, ranging from training, increased support for business facilitators, marketing funds, matching sites, increased information and network coordination. Some industries, such as hospitality and trade, are considered particularly vulnerable and in need of additional support.
It is clear that the organisational structures to deal with the effects of the pandemic on the business community at the regional level varies, and that most regions manage this within routine activities and organisation, although cooperation does generally increase. The pandemic is also often described as contributing to the strengthening of networks at both local and regional level. The lessons highlight both the wisdom of not being too hasty in launching efforts, and at the same time the pandemic has shown that it is possible to circumvent lengthy processes and achieve concrete results quickly. Sometimes the regions feel that the funds available and their associated ordinances restrict opportunity.
It is also clear that the regions have different approaches to the flexibility of existing regional policy grants. Some regions consider that the regulatory framework is relatively generous in terms of the opportunities to adapt support to regional needs; other regions interpret the regulatory framework as making it difficult to use support more flexibly without contravening the existing support regulations.
The fact that the regions interpret and apply the aid regulations differently makes it clear that there may be a need for the state to review the need to introduce amendments or clarifications in respect of the applicable regulations. In the context of such a review, it is appropriate to consider whether specific provisions should be introduced regulating the use of support in the event of a major crisis. There may also be a need for informational or seminar activities examining how the existing aid regulations can be applied. We note, however, that given the resources available, the efforts made at local and regional level are substantial. It is striking that in principle everyone has done what they can in a generally rapid and progressive way.
The national initiatives are comprehensive and quickly implemented
At national level, we do not yet know what the final cost will be, but we can see that, in response to the corona pandemic, the state decided to provide substantial financial support to the business community. Data as of March 31, 2022, show that the costs to the state of direct aid and reduced contributions amount to more than SEK 136 billion. In addition, there are issued credit guarantees and loans of SEK 66 billion and deferred tax payments of approximately SEK 60 billion. By comparison, during the financial crisis in 2008–2009, the state's extraordinary costs for supporting companies amounted to SEK 15 billion.
An important issue in principle is the orientation of support, which is to say which business groups it is targeted at and how long crisis support should be maintained. Too short a period of support risks being insufficient to overcome an acute crisis. At the same time, the risk increases over time that financial support hampers necessary structural change and keeps companies that are fundamentally non-viable in business. The longer the support remains, the greater the risk of hampering structural change. It is therefore important that a strategy is put in place at an early stage determining when and how support is to be phased out. According to the assessment of the Corona Commission, the Swedish Government chose the right strategy when it prioritised the rapid release of support to companies, although they also note that the support has also benefited companies not particularly affected by the pandemic. The Commission also considers that support in respect of short-term work arrangements has been allocated primarily to low-productivity firms. From a longer-term perspective, it is natural to direct business support and regional support more explicitly towards transformation rather than survival. One obvious example of this kind could be the shift towards a fossil-free society.
EU instruments to repair the damage caused by the pandemic
At EU level, we look in more detail at the “Recovery and Resilience Facility' (RRF), which is a temporary European recovery instrument to help repair the acute economic and social damage caused by the corona pandemic. The RRF is making available EUR 723,8 billion, of which EUR 385,8 billion is provided in loans and EUR 338 billion in grants. In order to benefit from RRF funding, each member state must submit a recovery plan to the European Commission. The European Commission is demanding that at least per cent of the funding must be directed towards climate targets and at least 20 per cent to digital targets. The RRF is financing reforms and investments implemented by member states during the period February 2020 to December 2026.
At the time the study was carried out, not all member states' recovery plans had been submitted or approved, but a general picture of the recovery plans, including the regional efforts identified, gives the impression of considerable breadth. The latter can be exemplified by actions relating to areas such as infrastructure, healthcare, digitization, the environment, natural disasters, tourism and waste management.
Sweden's recovery plan consists of a total of five focus areas and 26 initiatives. In this context, Sweden's budget is relatively modest with a budget application (grants only, no loans) amounting to 0.69 per cent of GDP. In financial terms, the plan encompasses a total of more than SEK 33 billion. 44 per cent of the budget is targeted at reforms and investments that support climate targets. 20 per cent of the budget is directed towards reforms and investments that support the digital targets. The work has not yet started, and lessons cannot therefore be learned from the implementation at this stage.
Observations and reflections
The impact of the pandemic in terms of geography and industry varies greatly, as do the opportunities to support the companies and employees that have been affected. The explanation for this is described as ‘multilayered’, the main obstacle being access to financial resources. For example, several regions highlight the differences in 1:1 funds. In essence, the possibility of using financial instruments is described as very uneven. However, the conditions for supporting the business community are also influenced by the role they are considered to play and how people choose to interpret local laws and regulations. This has impacted the initiatives that have been developed. It also seems that the grey area covering what is considered to be legitimate has been challenged during the crisis.
Furthermore, when initiatives have been developed the responsible stakeholders at all four levels have been faced with different trade-offs. Perhaps the most significant relates to the trade-off between being nimble and being legitimate, and the efforts having a high degree of accuracy. Many people highlight the speed at which initiatives were implemented and how well cooperation worked at a time of acute crisis, but that, if they had known what lay in store, they would have kept a 'cool head'; would have produced clearer need and target group analyses and would have discussed and embedded the proposals more closely with, for example, trade associations. It is also important to preserve the ability to be able to evaluate the initiatives and to consider the optimum way in which they will eventually be phased out.
There was a lot of uncertainty amongst those stakeholders trying to mitigate the financial impacts of the crisis. Everything from how hard the pandemic would impact the business community to how long it would last. It is important to consider how we can hold onto the broader experience gained during the pandemic – both positive and negative – amongst the organisations concerned and keep them up to date. The knowledge that the stakeholders have acquired, the relationships that have been strengthened, the readiness and the ability to act in a time of uncertainty are important factors in the work going forward.
However, the initiatives needed at a time of acute crisis are not necessarily the same as those needed on the longer journey from the crisis towards increased resilience and sustainability. One important question of principle is how long crisis support should remain in place. Too short a period of support risks being insufficient to overcome an acute crisis. At the same time, the risk increases that financial support hampers necessary structural change and keeps companies that are fundamentally non-viable in business.
Initiatives to mitigate the effects of the pandemic have been introduced at several planning levels. We see that the actions at one level of action affect the initiatives at another. In other words, initiatives at different levels can increase mutual impacts and effectiveness. It may therefore be beneficial to consider support to the business community in the context of the pandemic from a systemic perspective. It also means that efficiency can be increased through multi-level collaboration and multi-level coordination. It would also facilitate dialogue between the various levels and contribute to greater transparency and clarity. Several regions also express a great need for inter-regional and inter-municipal learning.
For large parts of the business community, the Corona pandemic has been an unprecedented economic shock. We know from experience that major economic crises occur at irregular intervals. It is therefore important to learn from the management of the corona pandemic in order to improve future crisis management. Cogent evaluations and analyses of financial support provide an important basis for such learning.
Business promotion measures during the corona pandemic – experiences and lessons learned
Serial number: Rapport 2022:05
Reference number: 2021/139
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