On Wednesday 25 March 2020, the European Commission approved two sepaEuropean Commission adopts new State aid exemptions to allow Governmentsrate UK State aid schemes to support SMEs during the COVID-19 pandemic. Both schemes were approved under the new State aid Temporary Framework adopted by the Commission on 19 March 2020. The Temporary Framework increases the scope for Member States to notify schemes of aid designed to mitigate the socio-economic impact of the Coronavirus outbreak.
The newly approved UK schemes relate to the Coronavirus Business Interruption Loan Scheme (CBILS), a temporary fund announced by the UK Chancellor on Tuesday 17 March, designed to support SMEs with access to loans, overdrafts, invoice finance and asset finance of up to £5 million and for up to six years. Funding under CBILS will be delivered through commercial lenders, backed by the government-owned British Business Bank. There are 40 accredited lenders able to offer the scheme, including all major banks. For more information on UK support measures available during the COVID-19 pandemic, please see our recent press release and for UK government guidance to businesses, please see here.
The two approved schemes, which will initially run until 30 September 2020 with the possibility for the UK to extend them until 31 December 2020, will respectively allow the provision of:
- Guarantees covering 80% of loan facilities for SMEs with a turnover of up to £45 million for working and investment capital needs; and
- Direct grants to support SMEs affected by the Coronavirus outbreak for which the overall budget is £600 million.
At this time the European Commission's decisions for SA.56792 and SA.56794 are not published, but we understand that it is likely there will be no sectoral limitations, beyond requiring the recipients to be SMEs.
In deciding to grant approval to the measures, the Commission concluded that each proposed intervention is necessary, appropriate and proportionate to remedy a "serious disturbance in the economy" of a Member State, in line with Article 107(3)(b) of the EU Treaty (TFEU) and the conditions set out in the Temporary Framework. In particular, the direct grant scheme falls within the €800,000 of benefit limit per company as laid down by the Temporary Framework and the conditions of the guarantee scheme are also aligned with the Framework, including safeguarding measures to ensure the advantages are effectively passed on to the borrowers. For a more detailed breakdown of the parameters of the Temporary Framework please see our recent article. Of course, recognising the urgency arising from the pandemic the European Commission is fast-tracking all Covid-19 related notifications.
The Commission's approval of the UK schemes follows a series of approvals of similar schemes over the recent days by other Member States under the Temporary Framework, such as Spain, Germany and Luxembourg. This demonstrates the swift approach adopted by the Commission to responding to notifications of aid during this unprecedented time.
We therefore expect that more approvals with be forthcoming over the next few days and weeks.
If you need any further advice in this area do not hesitate to contact one of our experts.
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DWF has a considerable depth of expertise in State aid law matters. We are able to draw upon a team of leading experts, in our UK, Brussels and other international offices, who have extensive experience in this area, including working within the UK Government on high profile funding matters, defending projects from recovery and designing projects to meet the rules.
