Direct business subsidies granted in response to the Covid-19 epidemic – Allocation and management of the subsidies in the early stages of the epidemic

The subsidies granted in response to Covid-19 were not allocated particularly well at first in view of the financial difficulties faced by companies. The business cost support introduced in the summer of 2020 was more equitable and managed to offset the financial impacts of Covid-19 better than the business development aid granted in the early stages of the crisis.

The audit was targeted at the direct business subsidies granted as a response to the Covid-19 epidemic and the funding allocated to these in the budget for 2020. On 19 March 2020, the European Commission issued a communication to provide flexibility to the EU state aid rules due to exceptional financial difficulties caused by the Covid-19 situation. In the early stages of the Covid-19 pandemic, several support schemes were developed rapidly to mitigate the difficulties faced by companies on account of the exceptional situation.

In spring 2020, there was public discussion about the problems arisen in the granting of business development aid.  In its statement of 24 April 2020, Parliament required the Government to take appropriate measures to ensure that the business subsidies related to the Covid-19 crisis are allocated equitably. The purpose of the business subsidies was to offset the economic impacts of the pandemic, to improve the possibilities of continuing and developing business, and to promote employment. The granted Covid-19 subsidies to which the audit was targeted amounted to approximately EUR 1.46 billion. In total, the state supported the business sector in 2020 by around EUR 4.2 billion.

According to the audit, the business development aid granted by Business Finland and the ELY Centres in the early stage of the crisis did not function well as crisis funding, as it was targeted at future expenditure arising from a specific project instead of the acute liquidity crisis. In addition, a large amount of business development aid was also granted to companies that did not suffer financially from the Covid-19 crisis. When the decisions on granting business development aid were prepared, the necessity of the aid was not assessed appropriately. The National Audit Office recommends that the state aid authorities pay attention to the clarity of the guidelines.

Business cost support responded to the deficiencies of the business development aid. It was targeted at companies the turnover of which had fallen significantly due to the Covid-19 pandemic and which had had difficulties in adjusting their business and expenditure in the changed situation. Several of the criteria for granting business cost support were as objective as possible. In the future, it is important to preserve the readiness to launch a mechanism similar to the business cost support quickly in the event of disruptions.