Different governments supported businesses in remarkably similar ways during coronavirus – but existing institutions and different policy priorities shaped the response

Governments across the developed world have drawn on a very similar toolkit of policies to support businesses through the worst of the Covid crisis. But a new analysis by the Institute for Government shows that the precise way in which policies were rolled out differed depending on the institutions, the degree of fiscal devolution that existed pre-crisis and the political leanings of those in power.

Support for business during the coronavirus crisis: An international comparison looks at the policies adopted in nine advanced economies – Canada, France, Germany, Ireland, Japan, New Zealand, Norway, Singapore and Sweden between March and September 2020 to help businesses navigate the crisis.

The report finds:

• All nine countries have offered businesses the opportunity to defer tax payments and to take out government-guaranteed loans on favourable terms to ease liquidity problems.
• Most of these countries have also given grants and tax cuts to at least some businesses, with some of this help being focused on those sectors that have been worst impacted by coronavirus – such as the tourism and events sectors.
• Governments have offered more extensive and generous support to small businesses than larger businesses: guaranteeing a greater proportion of loans taken out by small businesses, offering some grants only to small businesses, and imposing fewer conditions on help given to small firms than on large ones.
• Germany is the only country that has so far made equity stakes a core plank of its response to this crisis. Ireland and Canada have set up new schemes that could take equity stakes in businesses but these have not yet been used. The governments of New Zealand, Singapore and Sweden have all taken equity stakes (or given loans that could be converted into equity) in their national airlines but not in any other businesses.
• Most business support during this crisis has been designed, funded and distributed by central government. However, public bodies – such as regional development banks – have played an important role in administering business loans and some subnational governments have designed and funded their own schemes. Such subnational schemes have been most common in Germany and Canada (which are both federal states) and in Japan and France (which are unitary countries but have powerful subnational tiers of government.
• The mix of policies chosen reveal that governments have weighted objectives differently. The governments of Norway and Germany, for example, have offered generous loan guarantees, compensated businesses directly for lost income and reformed bankruptcy and restructuring laws – suggesting they leaned towards preserving existing businesses. The Singaporean government, by contrast, has focused grants on helping firms to adapt – suggesting they are keener to ensure that the economy restructures effectively.

This report was commissioned by the Scottish Parliament Information Centre (SPICe) to inform the work of the Scottish Parliament’s Economy, Energy and Fair Work Committee. However, the analysis and the views expressed are those of the authors, not those of SPICe or the Scottish Parliament.

Notes to editors

1. The Institute for Government is an independent think tank that works to make government more effective.
2. For more information, including data to reproduce any charts, please contact press@instituteforgovernment.org.uk / 0785 031 3791.