This study contains an updated analysis of state subsidies to firms during the coronavirus pandemic in Denmark, Finland, Great Britain, and Germany. It covers measures implemented up to 1 December 2021. As the coronavirus pandemic is still ongoing, there may be changes to policy measures after the report’s publication. The analysis is a follow-up of a study that we published in June 2021 (PM 2021:07).

In the same way as the previous study this study is based upon material from government agencies’ web pages and official statistics, as well as evaluations and analysis conducted by national audit agencies and research institutes. We have also interviewed staff at Swedish embassies and Business Sweden, as well as representatives from government, universities and business organisations in the countries studied.

The countries have successively phased out many of the various subsidies to businesses during the summer and autumn of 2021. The EU’s temporary framework for state aid has made many of the subsidies possible. The temporary exemptions have not changed during the autumn and, at the time of writing, they apply until 31 December 2021. Due to the increased spread of the coronavirus, they may be extended after this date.

New support measures have been introduced at the EU level, including funds, grants, loans, and guarantees. Some of the EU support includes conditions that a proportion of the funds be allocated to digitalisation and green structural transformation. It is only in Germany that we note the introduction of new types of national subsidies for businesses. These are directed to firms that hire new employees or reinstate staff that have been on the state furlough scheme.

Great Britain has come the furthest in phasing out subsidies. For example, the state no longer offers grants to firms. It has, however, introduced a new guarantee programme (with a lower loan ceiling than in previous programmes). The eligibility requirements for grants have been tightened in Denmark and they are now only available to firms with at least a 45 per cent decrease in turnover (from previously 30 per cent). In Finland, grants are now directed to firms in fewer sectors. In addition to federal subsidies, firms in Germany may also apply for subsidies at the provincial level. These are allocated subjectively to firms deemed to be exceptional hardship cases.

All four countries have granted firms extensions on previously due tax payments. Although no extensions are presently being granted for new periods, firms have the possibility to delay instalments within previously granted extensions. In Great Britain, the final date for payment of outstanding tax debt has passed. However, the HMRC has chosen to work with firms on designing realistic payment plans, rather than taking legal action. Measures for preventing bankruptcies, by means of various temporary amendments to insolvency legislation, have been implemented in Finland, Great Britain, and Germany. These measures have mostly elapsed, but in Germany the government has elected to bring forward implementing the new EU directive on insolvencies in national legislation.

It is still too early to draw any definitive conclusions concerning the pandemic’s effects on the survival of firms and on employment rates. This is in part due to the fact that many subsidies to the most affected firms still remain in place, and in part to various measures that have been implemented to prevent bankruptcies.

In Finland and Great Britain, work has begun on counterfactual impact evaluations of several of the state subsidies for firms. A lack of access to register-based data presents a hindrance to more qualified evaluations in Germany. We have, however, identified several survey-based studies and an analysis of the effects of the temporary VAT reduction. In Denmark, the government has appointed expert groups of economists to provide advice on phasing out subsidies and on policy making for the economic recovery.