COVID-19 and the Temporary Framework
On 19 March 2020, the European Commission adopted a Temporary Framework, with amendments added on 3 April 2020, 8th May, 29th June and 13th October to further enable Member States to use the full flexibility foreseen under State aid rules to support the economy whilst accelerating research, testing and production of relevant products in the context of the COVID-19 outbreak.
This framework is based on Article 107(3)(b) of the Treaty on the Functioning of the European Union to remedy a serious disturbance across the EU economy. The aim is to ensure that businesses have the liquidity to keep operating, or to put a temporary freeze on their activities, if need be, and that support for businesses in one Member State does not undermine the European single market.
The Temporary Framework and subsequent amendment provides for the following types of aid. It will enable Member States to:
- set up schemes direct grants (or tax advantages) up to €800,000 to a company
- give subsidised State guarantees on bank loans
- enable public and private loans with subsidised interest rates
- use banks’ existing lending capacities, and use them as a channel for support to businesses – in particular to small and medium-sized companies - the Temporary Framework makes clear that such aid is direct aid to the banks' customers, not to the banks themselves
- introduce additional flexibility to enable short-term export credit insurance to be provided by the State where needed.
- support for coronavirus related research and development (R&D)
- support for the construction and upscaling of testing facilities
- support for the production of products relevant to tackle the coronavirus outbreak
- targeted support in the form of deferral of tax payments and/or suspensions of social security contributions
- targeted support in the form of wage subsidies for employees
The new Framework does not replace but complements the many other possibilities already available to Member States in line with State aid rules.
Article 107(2)(b) of the Treaty on the Functioning of the European Union (TFEU) has also been used in the context of COVID-19 outbreak. Article 107(2)(b) enables the Commission to approve State aid measures granted by Member States to compensate specific companies or specific sectors for the damages directly caused by exceptional occurrences, such as the COVID-19 outbreak.
Further information can be found on the Commission’s State aid webpages: State aid COVID-19
UK Approved Umbrella Scheme (SA.56841)
The EU have approved a £50 billion UK wide scheme under the Temporary Framework (TF) allowing for the provision of State aid measures to support the economy in the current COVID-19 outbreak. The aim is to ensure that businesses have the liquidity to keep operating, or to put a temporary freeze on their activities, if need be, whilst ensuring that support for businesses does not undermine the European single market.
Provisions of the UK-wide scheme are as follows:
- aid meeting all of three criteria will be approved (direct causal link between COVID-19 and the scheme; Aid strictly limited to compensating only for the damages caused; No accumulation with other aid for the same costs).
- the aid should not exceed €800,000 per undertaking in the form of direct grants, repayable advances, tax or payments advantages before any deduction of tax or other charge and may not be granted to undertakings that were in difficulty on 31 December 2019. Awards must be made no later than 31 December 2020. (SA.58078 published 31/07/20 amended the UK umbrella scheme to allow aid to small and micro enterprises that were already in difficulty on 31 December 2019)
- aid not exceeding €100,000 may be granted to undertakings active in the processing and marketing of agricultural products and is conditional on not being partly or entirely passed on to primary producers and is not fixed on the basis of the price or quantity of products purchased from primary producers or put on the market by the undertakings concerned.
- aid not exceeding €120,000 per undertaking may be granted to undertakings active in the fishery and aquaculture sector.
The ‘umbrella’ scheme also provides for:
- direct grants, repayable advances, and tax advantages of up to €800,000 to individual companies
- aid in the form of guarantees on loans
- aid in the form of subsidised interest rates on loans
- aid in the form of guarantees and loans channelled through credit institutions or other financial institutions
- short-term export credit insurance
- aid for COVID-19 relevant research and development
- aid for testing and upgrading infrastructures
- investment aid for the production of COVID-19 relevant products.
Read the guidance on the Covid-19 Temporary Framework for Scottish Public Authorities which provides further detail on reporting requirements and transparency procedures.
There are three essential reporting requirements:
There is a requirement to provide the Department for Business, Energy and Industrial Strategy (BEIS) with details of all funding programmes which rely on State aid cover provided by the UK (TF) Umbrella scheme. This entails a monthly e-mail to the Scottish Government State Aid Team confirming the aid measure is operating in compliance with the TF conditions and a summary of expenditure to date (by calendar month if possible). We will forward the details which will allow BEIS to monitor total spend for all funding does not exceed the budget of umbrella scheme.
Transparency Reporting. Comprehensive details are required for publishing individual aid awards. More detail on this can be found on the Transparency page.
Annual Reporting. State Aid Team will conduct an exercise after the UK Umbrella Scheme ends on 31 December 2020 to capture the total spend and number of awards granted. Funding bodies are required to track and monitor all aid awards issued in order to provide this information.
Please contact the State Aid Team if your policy area intends to provide support using state aid cover available under the UK umbrella scheme.