Supporting SMEs in time of COVID

2020 started off as the year where the European Union welcomed a new leadership and with it, a new long list of political ambitions. Little did they know that the year ahead was going to be marked by a once in generation crisis, one that has put on hold the European Commission’s ambitions for the mandate and led to the reorganisation of EU priorities.

Like with any unexpected global crisis, government has had to change gear: the European Commission was quick to act while the Member States, many of them caught off guard, have been sticking plasters on gaping wounds.

As Jean Monnet said, “make men work together, show them that beyond their differences and geographical boundaries there lies a common interest”. And what started off as mainly an Italian and Spanish concern has turned into a Europe wide problem, and has highlighted the need for more Europe and more solidarity – not less.

COVID-19 is having a devastating impact wherever it goes; not least on  European SMEs who are suffering the most damaging consequences. Different surveys conducted within and outside of the European Union who that more than half of SMEs now face severe losses in revenues and staff with many having only a few months reserves to withstand the crisis[1].

European governments have been scrambling to help save their economies by providing a wide range of emergency support that may or may not arrive in time to save the small business community. We see the emergence of different forms of deferrals or reduction of tax and social security contributions; widespread financial guarantees; subsidising wage of employees working shorter hours and postponing repayments of loans to direct grants, cash injections for micro businesses and self-employed or the reduction of administrative burdens.[2] SMEs will need to put the pieces of this big puzzle of measures together.

With so much complexity and fragmentation, do SMEs and entrepreneurs know what is happening in their member state? Are the eligibility criteria put forward by governments clear enough?, Are measures and payments immediate enough?

The European Commission has also put in place a series of measures that are designed to give further relief and support to struggling businesses:

• Modification of some of key features of the TLTRO III[3], with the announcement of a new kind of targeted longer-term refinancing operation aimed at banks’ lending to SMEs;[4]

• A call for start-ups and SMEs with the necessary technology and innovation for treating, testing and monitoring the COVID-19 outbreak. This has a total budget of budget of €164m and no pre-defined topics;[5]

• A Proposal to mitigate the negative socio-economic consequences of the COVID-19 outbreak. This plan foresees increasing the flexibility in the use of State-aid and fiscal schemes; mobilising the EU budget to allow short-term liquidity to SMEs by the EIB Group, and redirecting €37 billion to fight COVID-19 under the Coronavirus Response Investment Initiative;[6]

• Council adoption of measures for immediate release of funds, giving Member States access to €37 billion of cohesion money and aiming to strengthen healthcare systems, SMEs, short-term working schemes and community-based services; [7]

• An instrument for temporary Support to mitigate Unemployment Risks in an Emergency (SURE). This new instrument has been designed“to help protect jobs and workers affected by the coronavirus pandemic” [8]. Financial assistance will be provided in the form of loans on favourable terms from the EU to the Member States, reaching a total sum of €100 billion. These will support Member States in the creation of short-time work schemes or support measures for the self-employed. [9]

If you are an entrepreneur or an SME owner, please check this link, as ESBA has become a repository of EU and MS information, and encourages all its guests to contribute to the debate.We want to be informed, and we want to keep you informed.

Indeed, all measures put in place by the European Union and its Member States are warmly welcomed by the SME community. But these measures can only be fully effective if they are easily accessible. Can SMEs across Europe truly benefit when facing an endless mountain of administrative processes and applications?

And it is clear, that SMEs are less resilient than larger corporations, especially when it comes to  lack of cash flow and liquidity. That is why ESBA has launched the PayIn7 campaign, which calls upon all public bodies at local, national and EU level to tackle the cash squeeze caused by the COVID-19 crisis. This can be done through a €65 billion boost to small business cash flow by encouraging all public payers to pay their bills within 7 days, rather than 30. Join us to make this not just a campaign, but the new reality for SMEs.

Last but not least, a community is only as strong as its members, and we want to hear from you. Let us know what you and your government are doing to keep small business afloat; to ensure that the Single Market is properly functioning; and to enable cross-border trade. Keep us updated on the latest measures – leave a comment on our website and share your national best practice.

We invite you to make use of our resources, and to keep yourself informed.

• [1] SME Policy Responses, Tackling Coronavirus (COVID-19) Contributing to a global efforts, OECD Centre for Entrepreneurship, SMEs, Regions and Cities 

• [2] Information obtained through the SME Envoy Network

• [3] The third series of targeted longer-term refinancing operations

• [4] ECB announces easing of conditions for targeted longer-term refinancing operations (TLTRO III), Press release, European Central Bank, 12th of March 2020

• [5] Applications welcome from startups and SMEs with innovative solutions to tackle Coronavirus outbreak, European Commission, 13th of March 2020 

• [6] COVID-19: Commission sets out European coordinated response to counter the economic impact of the Coronavirus, Press Release, European Commission, 13th of March 2020

• [7] COVID-19-Council adopts measures for immediate release of funds, Press Release, Council of the EU, 30th of March 2020

• [8]Commission proposes SURE new temporary Instrument worth up to €100 billion to help protect jobs and people in work, Questions and Answer: Commission Proposes SURE, European Commission, 2nd of April 2020 

• [9] Commission proposes SURE new temporary Instrument worth up to €100 billion to help protect jobs and people in work, Q