An environmental analysis of government pandemic support: omicron support, decommissioning and lessons learned

This report is the third international study within Growth Analysis’ assignment to study the Swedish business subsidies during the coronavirus pandemic. As in the two previous international reports, the countries studied are Denmark, Finland, the United Kingdom, and Germany. We also shed light on the EU’s role in enabling subsidies.

Our analysis focuses on the countries’ use of subsidies during the outbreak of the omicron variant of the coronavirus at the end of 2021 and the beginning of 2022. We also make a
comparative analysis of how the countries have phased out the subsidies, as well as the
lessons learned.

Selected subsidies were reintroduced in Denmark, Finland and the United Kingdom
during a limited period following the omicron breakout, with some adjustments to
eligibility criteria. In Finland and the United Kingdom, the subsidies were directed to
particularly affected firms within the close-contact, customer service sector. This stands
in contrast to the earlier approach of broader more quantitative eligibility requirements,
such as a minimum reduction in turnover. Denmark, even before omicron, had
introduced more restrictive eligibility requirements and later used them again during
omicron. Denmark also briefly reintroduced the furlough programme, while
the United Kingdom did not do so. Both Finland and Germany have long-standing
furlough programmes, since prior to the pandemic. As a response to the spread of
omicron, Germany chose to further extend its subsidy packages. The eligibility criteria
remained unchanged under the entire pandemic.

At the time of writing, business subsidies related to the pandemic have generally been
phased out. Since 30 June 2022, the EU regulations only permit extensions on loans and
guarantees as well as the conversion of certain subsidies in the form of debt to grants.
Even if no new subsidies ultimately are granted, the final bill for the corona subsidy
packages is yet to be determined. Many firms continue to have outstanding debts in the
form of tax deferrals and publicly guaranteed loans. Several of the countries have given
firms extended annuity periods for repayment of loans and taxes. In Denmark, for
example, the repayment deadline for tax deferrals has been extended to 2023. The British
tax office is working with firms who have missed repayment deadlines to design new,
realistic payment plans for deferred taxes.

Despite the various measures to assist firms in managing debt, insolvencies have been
increasing rapidly during 2022 in Denmark and the United Kingdom. In Finland,
insolvencies have been at normal, historical levels during 2022. Germany, on the other
hand, has had lower insolvency rates both during and after the pandemic. A possible
cause is that Germany, unlike the other countries in this study, continued to provide
firms with the same subsidy package during the entire pandemic. All of the countries
studied have experienced other economic shocks during the second half of 2022,
including the energy crisis and rapidly rising inflation. Thus, we cannot draw
conclusions regarding subsidies’ role in insolvencies.

One British study of firms’ use of corona loans shows that firms to a small extent used the
funds for productivity-enhancing investments such as physical capital. This indicates that
many affected companies that received support may have underinvested in their
En omvärldsanalys av statliga pandemistöd: omikronstöd, avveckling och lärdomar 9/53
development during the pandemic. The corona subsidy packages were generally not
targeted towards promoting R&D and innovation. There are some exceptions, such as
increased R&D tax rebates (Denmark), faster depreciation rates for capital investments
(United Kingdom) and for so-called IT goods (Germany). Several countries also launched
public funds to match business angels’ investments in start-ups.

Several of the countries plan to carry out more evaluations of the support in the coming
years. The United Kingdom and Finland have launched the most rigorous evaluation
programmes. Both countries are working on contra-factual econometric evaluations using
micro data. The United Kingdom has also launched a national inquiry that will be carried
out under a number of years. The German evaluations have been based upon survey data
and macro-economic models during to the lack of register-based data; however, the
Federal Ministry for Economic Affairs and Climate Action is planning an evaluation at
the firm-level in a few years.

An environmental analysis of government pandemic support: omicron support, decommissioning and lessons learned

Serial number: PM 2022:14

Reference number: 2021/52

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A partial study of the project:


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