COVID-19 financial support to small businesses in Switzerland: evaluation and outlook
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(2020) 156:15
Swiss Journal of Economics and Statistics
ORIGINAL ARTICLE
Open Access
COVID-19 financial support to small businesses in Switzerland: evaluation and outlook Marius Brülhart1, Rafael Lalive1*, Tobias Lehmann1 and Michael Siegenthaler2
Abstract We analyse small businesses’ recourse to public support measures during the COVID-19 crisis using a survey of 1011 self-employed workers and small business owners in Switzerland. We find that “objective” measures of lockdown affectedness and economic structure explain fairly well how businesses availed of support measures to cover labour costs. Recourse to government-backed corona loans, however, appears to be driven to a larger extent by behavioural idiosyncrasies across firms. Specifically, previously indebted businesses took out corona loans more readily than those who had been debt-free before the pandemic. Since uptake is not well in line with firm fundamentals, we propose making loan repayments contingent on future profits. This will more effectively target and sustain businesses that are in trouble today but would be viable in the absence COVID-19.
1 Introduction Faced with rapidly increasing Covid-19 infections, the Swiss government decreed a partial lockdown on 16 March, 2020. Non-essential shops, restaurants, entertainment venues, schools, nurseries and universities were closed, and non-essential workers were asked to stay at home and work from there if possible. The lockdown was gradually relaxed after 27 April, with most restrictions lifted by 8 June. For many businesses, the pandemic meant a dramatic or even complete loss of turnover. Recent research shows that overall spending would have been severely reduced even in the absence of a decreed lockdown, because of consumers’ fear of infection and because of a collapse in export demand1. It is 1
See e.g. Brzezinski et al. (2020).
* Correspondence: [email protected] We thank Cédric Tille (the editor), an anonymous referee, Jonathan Chanel and Guillaume Rais for helpful comments. Marius Brülhart and Rafael Lalive are members of Swiss National COVID-19 Science Task Force. 1 Department of Economics, HEC Lausanne, University of Lausanne, Lausanne, Switzerland Full list of author information is available at the end of the article
estimated that total demand fell by more than 30% during the Swiss lockdown, and GDP is projected to contract by more than 5% over the whole year2. Demand will likely remain subdued at least in certain sectors for as long as social distancing is warranted and foreign markets are depressed. This state of affairs could potentially take several years until a vaccine or an effective cure is found. The combination of a time-limited forced shutdown of large parts of the economy followed by a potentially long lasting drag on contact-intensive activities presents economic policy-makers with monumental challenges. The main goals in the initial lockdown period were to avoid excessive income losses by workers in affected sectors and to avoid damage to the productive structure of th
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