Emergency financial measures approved

Saturday 21 March 2020

Direct financial support to businesses totalling £30m, a £40m loan guarantee scheme for locally-trading firms and a £25m temporary overdraft facility to Aurigny are among a raft of substantial emergency measures approved by the States.

Policy & Resources put together a package of new measures in response to the unprecedented position the island's economy finds itself in following the global outbreak of Covid-19 outbreak.

£30m-worth of direct financial support is being developed that will tackle some of the issues being faced by local businesses over their cash flow and the increased need for working capital in order to continue operating.

"There is a very real need to provide appropriate financial support at this time and the very real impacts of the Covid-19 outbreak are already being felt in several sectors, for example, those in the travel and hospitality sectors have felt the full force of the travel restrictions put in place and encouraged by numerous governments," said Policy & Resources yesterday. "This, and other sectors, will undoubtedly require help to tide them over this difficult period and retain a strong and vibrant hospitality sector for the future."

Pictured: Policy & Resources Vice-President Lyndon Trott said his committee's proposals were an initial response to the crisis and that more funds could well be needed in the future from the Core Investment Reserve.

As the duration and magnitude of the economic shock caused by the corona virus is highly uncertain, Deputy Trott yesterday said it would be "unrealistic and unaffordable" for the States to support the whole economy and all businesses through this period.

The economic and fiscal response will focus on preventing job losses and business failures as a result of the crisis. 

The measures include consideration for companies and self-employed businesses to defer social insurance contributions for the first half of 2020 and also for the deferral of commercial TRP, both with the exception of professional services and regulated finance businesses.

In addition, consideration is being given to deferring rents to local business where the States is the landlord, with all commercial landlords encouraged to do likewise, while the mooring fees for commercial fishermen will be waived until the end of the year.

Separately, a £5m hardship fund is being created to assist people who were not previously eligible for States benefits but are now in dire financial need. 

The policy letter from Policy and Resources on responding to the #Covid_19 pandemic may be only 6 pages long but it is model of brevity and does exactly what it needs to do.

— Christopher Green (@deputycgreen) March 20, 2020

Pictured: Deputy Chris Green said P&R's policy letter was a direct and fleet-footed response to the current crisis.

The States has also unanimously approved the creation of a £40m loan guarantee scheme which will be available for locally-trading businesses to apply to. 

The States of Guernsey will have to share the risk with the banks by offering underwriting support for up to 80% of the scheme’s lending and there will be a limit placed on the maximum lending available to an individual business.

The other financial commitment to the tune of tens of millions of pounds is a significant extension to Aurigny's current overdraft facility.

The States-owned airline, which has an annual turnover of around £45m, currently holds approximately £7m in forward bookings and P&R said it is "very difficult to forecast how much of that may need to be refunded".

Given the "substantial fall in advance bookings" following the covid-19 pandemic, the company is forecast to be around £23million to £27million in arrears should the current travel restrictions remain in place for the rest of the year.

With that information in hand, the States, despite reservations from some Deputies, unanimously agreed to extend Aurigny's  £27million temporary overdraft facility to a maximum of £52.7million in 2020.

Pictured top: This week's States sitting was held at St James so deputies and States officials could 'socially distance' themselves from one another.