ECONOMY

State aid helped 56% of EU businesses during the pandemic

Over half of EU companies received some form of state support during the pandemic, allowing many more of them to preserve their investment plans than initially expected, according to new research by the European Investment Bank.

While almost half of EU businesses suffered a drop in revenues after the coronavirus pandemic struck last year, the massive support provided by governments helped many to stay afloat and to continue investing, according to the EIB’s survey of 13,500 companies.

European companies were also less responsive in the crisis, according to the survey published on Thursday. It found a far lower proportion of businesses in the EU than in the US took short-term action in response to the pandemic, such as becoming more digital, launching a new product or shortening their supply chain.

In the EU, 46 per cent of companies surveyed said they had become more digital in the past year, but that is well below the figure in the US, where 58 per cent of businesses said this was the case. In Europe, just over a third of companies that had not yet implemented advanced digital technologies took the crisis as an opportunity to push their operations in that direction.

“The pandemic called for a quick and bold response. And governments and the EU gave it,” said Ricardo Mourinho Félix, EIB vice-president. “This support was crucial in helping companies make it through the lockdowns. It helped to safeguard the investment capacity we urgently need to accelerate the green and digital transformation.”

The EIB found 56 per cent of EU companies said they had received state support. Over a third of small businesses said they would have faced an existential threat without the aid, which in many cases did not have to be paid back.

When the pandemic hit Europe in March 2020, many of the region’s governments spent billions of euros to support companies and workers with furlough schemes, state-guaranteed loans, grants and tax deferrals. The EU also launched an €800bn fund to finance governments’ rebuilding plans.

This seems to have cushioned the impact of the crisis on corporate investment, even though the EU was plunged into a record postwar recession last year.

There were 8.5 per cent more businesses in the region saying they had cut their investment than had increased it last year, according to the survey. That is much less than was indicated by the previous year’s EIB survey, which found 28.2 per cent more companies planned to cut their investments in 2020 than increase them.

Highlighting how the global economy has bounced back from the pandemic recently, this year’s survey found there were 17.8 per cent more companies planning to increase their investments than to cut them in 2021.

“If you exclude airlines, where there are certain one-off effects, we are now close to pre-pandemic levels of investment, which is in contrast to the global financial crisis when it took over a decade to return to pre-crisis levels of investment,” said Debora Revoltella, chief economist at the EIB.

One area where European companies seem well ahead of their US counterparts is in investing to tackle climate change, which 43 per cent of EU companies said they had done, against only 28 per cent of American businesses.

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