Relaunching retail and tourism and support for SMEs, the main lockdown exit measures in Europe

Aurel Constantin 07/05/2020 | 13:51

All European countries took certain measures to protect and restart their economies after the lockdown period. Among governments’ priorities, retail, tourism and SMEs have benefited from most measures, considering that these areas have been the most impacted by the Covid-19 epidemics across Europe, according to Colliers International. Romania has so far taken measures like direct funding support for SMEs, as well as deferred taxes and waivers for penalties for late payments and will focus on a retail relaunch strategy after the exit from the state of emergency.

Many European countries are already in the second phase of the Covid-19 epidemics evolution, implementing exit strategies from the lockdown. More than half of EMEA countries monitored by Colliers International in terms of government stimulus and strategy have already outlined and some even deployed a phased exit strategy from their national lockdown, with many targeting retail, tourism and SMEs. In terms of real estate, the vast majority of European countries have focused their initial strategy around the reopening of retail in a variety of forms, alongside schools.

Focusing on SMEs is relevant due to the structure of most European economies, including Romania’s. Micro-, small- and medium-sized companies make up over 99 percent of the total number of enterprises in Romania and in the EU, while generating two in three jobs in all economies and a bit over half of the gross value added. So while smaller companies may not be as efficient as the larger ones in terms of value added, they are more relevant from a social impact standpoint.

Measures maintain social and physical distancing

Most phased exits concern reopening retail shops and services, with DIY, garden centres and hair salons top of the list. In the vast majority of cases, the HoReCa sector reopening will follow in late May or early June, according to specialists. Some European countries also have a school reopening strategy, with kindergartens being favoured over primary or secondary education levels, thus providing greater capacity for parents to return to work. In Southern Europe, however, including Romania, the current guidance states schools will not open until autumn.

“Very few countries have explicitly set out policies around returning to the office or provided guidance for the use of public transport, with the exception of the obligation to wear face masks in a lot of countries. For those countries that have a guidance for this, there is a clear capacity cap in terms of usability, to maintain social and physical distancing. Excepting Czechia, national borders remain closed with national travel restricted,” says Laurentiu Lazar, Managing Partner at Colliers International.

Exiting the lockdown – the great comeback

Germany, Austria and Switzerland are leading the recovery and these countries have seen a marked improvement in terms of falling numbers of active COVID-19 cases levelling off, resulting in a shift towards exiting the lockdown.

Other countries around this core of Europe, like Denmark, Czechia, Slovakia and Italy, have also moved into a phased lockdown exit, albeit at different speeds and under slightly different circumstances. Additional countries that have seen COVID-19 cases levelling off and adopting a phased exit strategy are within the broader CEE region, including Croatia, Montenegro, Lithuania and Latvia. Israel adds to the EMEA picture.

Romania, direct funding support for SMEs

One of the most important measures taken by Romania for the business sector’s recovery has been direct funding support for SMEs, micro enterprises and small businesses, which has been rolled out fairly recently. At the same time, the Government allowed companies with no late payments to banks to request postponed loan repayment as long as they hold a certificate issued by the Government which shows a major decline in business in March on account of the state of emergency. Also, some taxes could be deferred and some penalties for late payments have been waived.

The state also decided to cover a technical unemployment payment of up to 75 percent of the average gross wage in the economy for people made redundant in this period, which has been, arguably, the most utilized state facility thus far. The government promised to shoulder part of the wages going forward if companies rehire these people, but no specifics are currently clear regarding this. While most measures have been geared towards SMEs, government officials also stated that they would come forward with aid for bigger companies. Specifically, for the real estate sector, a new law adopted by the Parliament, yet to be ratified by the President, offers landlords the chance to not pay income tax on rental revenues through 2020 if they reduce their tenants’ rents.

Support measures for real estate in Europe

Some of the biggest European countries have taken extensive economic measures to protect their economies, including the real estate sector. In Italy, a law decree on 18th March provides a tax credit – 60 percent of the rent of March 2020 for shops and boutiques, subject to extension. In France, a law protects SMEs from eviction in the event they cannot meet rent or service charge payments, starting 12 March until 2 months after the end of the state emergency.

In Germany and the United Kingdom, the governments imposed a moratorium on evictions, while in Hungary tenant evictions are suspended until the end of the state of emergency. Other countries, like Greece, pushed for a reduction in rents while also providing compensatory measures to landlords, while in Austria, rent subsidies were offered by the state if certain conditions were met.

Almost all the countries took measures regarding the financing access for SMEs and the companies most affected. UK, Germany, Italy, France and Austria announced packages estimated at tenths or hundreds of billions of euros each to help the economy. Also, most of the governments announced state guarantees packages or loan payments moratoriums to avoid a complete freezing in the financing sector with dire consequences in the entire European economy.

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