Business owners all over Norway heaved a collective sigh of relief on Tuesday, after Parliament approved its largest package of expenditures ever. They involve emergency measures aimed at warding off bankruptcies during the Corona crisis, including cash support to businesses forced to close.
“It’s the largest commitment the Parliament has ever made,” Tryvge Slagsvold Vedum, a Member of Parliament and leader of the Center Party, told Norwegian Broadcasting (NRK). It’s worth up to NOK 50 billion (USD 480 million), with its cash support provisions expected to cost around NOK 20 billion a month.
Vedum and other opposition politicians in Parliament modified the government’s initial crisis package and cash support proposal but largely approved it, while also promising that control procedures will be in place to prevent the aid package from being abused. Business owners will quickly be able to apply for cash from the state to cover as much as 80 percent of their “unavoidable” monthly expenses such as lease payments and electricity bills.
For full details of the state’s relief measures for business, click here (external link to the Finance Ministry’s website).
“My first impression is absolutely positive,” restaurant owner Bjørn Tore Furset told newspaper Aftenposten just before the package was approved. His company Fursetgruppen owns or partly owns such well-known restaurants in Oslo as Grand Café, Ling-Ling, the three-Michelin-starred Maaemo and Ekebergrestauranten. All of them lost most all their income overnight when the government shut down much of the country on March 12 to limit the spread of the Corona virus.
Neither Furset nor most other business owners expected full compensation for their costs of closure. The cash support will at least help them cover ongoing costs until they can finally reopen for business. Then it will depend on what kind of operating restrictions may be imposed, but most expect customers to return.
‘Putting business on life support’
“This will help us through the crisis,” said Johnny Ottesen, chief executive of the retailing firm Voice Norge that owns three clothing chains at which 1,425 employees are currently laid off. Håkon Pettersen, co-owner of the popular Dattera til Hagen bar in Oslo’s Grønland district, was also positive: “I think this will function well. It looks like it will offer widespread assistance.”
Several owners and operators of hotels that also have been forced to close were positive as well, with Richard Grov of the Hotel Alexandra in Loen telling newspaper Dagens Næringsliv (DN) that the cash support and other crisis measures “will be of great help.” Erik Berg of the Classic Norway hotel chain equated it to “putting businesses on life support,” fearing that “some will still die.” He and others like Morten Thorvaldsen of Thon Hotels think more state assistance will be necessary over time.
The state is already covering most of the salary costs for laid-off employees for up to 20 days, after which state welfare agency NAV will pick up the cost of unemployment benefits. Now the state is trying to make sure that laid-off workers will have a job to which they can return when the Corona crisis lets up.
MP Terje Lien Aasland, who’s also finance policy spokesperson for the Labour Party, likened the crisis package and especially its highly unusual cash support portion to “a huge contract” between the state and business owners. “It means that everyone contributes so that everyone can emerge from this situation with their honour intact,” Aasland said at a press conference Tuesday morning.
‘Reaching out a hand’
The Parliament stopped short, as expected, from banning companies that receive cash support from issuing shareholder dividends. Companies will, however, be expected to limit both dividends and any bonuses to executives. Companies are also expected to rehire everyone laid off, and not take advantage of the Corona crisis to unnecessarily cut costs.
The cash support offer is mainly aimed at small businesses that were ordered to shut down, including hair salons, bars, restaurants and others that involved close contact with customers. The system by which they can receive cash from the state directly into the business’ bank account has been described as simple and transparent, with plenty of potential for audits and other forms of control by tax authorities and other state officials.
“Today the Parliament and Norwegian society are reaching out a hand to businesses,” Aasland said. “I hope we mange to save businesses that otherwise may have gone under, and keep the wheels of business turning.”