Business support during the pandemic – lessons learned for future crises

In March 2020 it became clear that the pandemic and the measures to contain it would have significant negative effects on employment and businesses. In response, the former Swedish government introduced a large number of support schemes directed toward the Swedish business sector.

As a preparation of an eventual similar future crises, it is important for policy makers to learn from and build new knowledge of how the different support schemes worked and could be made better. As part of this learning process, the government instructed the Swedish agency for growth policy analysis to initiate a structured follow-up and evaluation of the economic measures directed towards the business sector due to the corona pandemic.

All businesses did not have the same chances to take part of the support schemes

In this report we show that the different conditions to be met in order to be eligible for a government support scheme meant that all firms, when in need, did not stand the same chance. When comparing different sectors, Manufacturing looks like a relative winner while Hotel and restaurant, who saw the largest drops in sales, seem to be the losers. We cannot, however, see that firm size mattered, large and small firms on average had the same expected outcome when all support schemes were added.

The support schemes are to a large extent delayed payments

Out of the SEK 208 billion in pandemic support schemes, approximately half of the amount are delayed income tax, employers’ fees and value-added taxes. Around 94 percent of the 208 billion consist of the four largest measures, delayed taxes, short-time work, temporarily reduced employer’s fees and adjustment support. Followingly, in our report we focus on these four support schemes.

The majority of support has been given to firms and sectors that saw lower turnovers during the first dramatic year of the pandemic, 2020. At the same time, between 20 to 35 percent of all support to firms was given to businesses who, at least over the whole year, had an increase in turnover.

Manufacturing, Trade, Construction and Hotel and restaurant are the four sector that were given the largest support. For Manufacturing and Construction delayed payments constitute more than 60 percent of the total amount. When we summarize support per employee then Hotel and restaurant and Culture, Entertainment and Leisure are the sectors that received the largest amounts. Small business is the firm size who received the largest share of the support as well as support per employed.

The firms valued the support but point at overly complicated bureaucracy and long processing time

As a way to understand how the firms perceived the support system, we interviewed a sample of firms about their views on the design and administration. We also collected a sample of relevant trade associations’ views about the support schemes.

While the possibility for short-time work was appreciated, there is massive criticism about the design, reach and handling. The adjustment support was regarded as one of the more valuable supports, but there were some criticisms regarding conditions and design. In general, handling time and the administrative processes were often regarded as too long.

The support schemes were likely the reason for the sharp decrease in bankruptcies during the pandemic

In this report we discuss and present a number of analyses on how the survival of the firms, total employment and the structure of the economy were affected by the government support measures.

Our analyses on the survival of the firms are descriptive. The clear times-series and correlations between receiving support and the probability for bankruptcy indicate that the measures were successful in keeping firms afloat. The patterns we see indicate that the support may have been particularly successful to firms with employees but less so for firms without workers.

And they likely slowed the down-turn on the job market but with dead-weight losses

Both the short-time support and temporarily reduced employer’s fees – the two largest direct monetary support schemes – where aimed to slow down the loss of jobs. Our effect evaluations indicate that they worked as intended. Short-term support was significantly more effective though. However, a drawback was that the positive net effect on employment only occurs during the initial down-turn of the economy. As the economy started to grow again, the positive effect on employment disappears and even turn negative.

We need more analyses and evaluations

Our report should be viewed as one puzzle piece in a relatively large puzzle. We have been restricted from conducting more analyses by the short time span since the pandemic officially was declared as over. The proximity makes the existence and availability to data difficult, and long-term analysis is even more difficult to conduct.

In order to get the full picture of how the policy measures affected the Swedish business sector, it is important with future research and analyses. As data gets accessible, new questions arise and with the development of new quantitative and qualitative methods, we are hopeful that more and better studies will be undertaken.

Business support during the pandemic – lessons learned for future crises

Serial number: Report 2023:01

Reference number: 2021/5

Download the report in swedish Pdf, 5.1 MB.

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