Within just a few weeks of reports that the virus had spread to the continent, almost the whole of Europe was swept into lockdown. Borders were closed, trips cancelled and thousands of people began to work from home full-time, while others were laid off or placed on furlough: a blow to the real economy barely anyone had anticipated.
Many in finance predicted a market correction was likely by 2021, but nobody quite expected what could be the worst recession for centuries. It's clear that many of the businesses that closed their doors in March will never reopen – a number of UK retailers have already folded – but European policymakers have been working hard to ensure that as few as possible exit entirely.
Early on in the lockdown, the UK government announced the Coronavirus Business Interruption Loan Scheme (CBILS). CBILS has offered financial support to smaller businesses (SMEs) across the UK that are losing revenue as a result of the pandemic, along with various other schemes. These fast-track schemes resemble moves made in other European countries such as Germany, Denmark, Italy, Spain and France – which have all made varying commitments to support local businesses and employees. As President Emmanuel Macron said during his lockdown announcement, "no business, whatever its size, will face the risk of bankruptcy".
The UK government published new statistics at the end of May showing that British businesses have to date benefitted from over £27 billion in loans and guarantees to support cashflow during the crisis. Boris Johnson's government has also introduced a new insolvency and governance bill, enabling organisations undergoing a restructuring and rescue process to continue trading, as well as the temporary suspension of wrongful trading until the end of June. So far companies seem to like it. However, for many, the 2020 landscape remains grim. We have yet to see the full extent of the damage done by the pandemic – and many have raised entirely legitimate concerns about the impact on Brexit negotiations. Concerns are that the UK is back in no-deal territory. Meanwhile, foreign direct investment (FDI) will become more challenging in many jurisdictions, making it harder for companies to scale internationally. The European Commission has already advised member states on how to protect what are now cheap assets from foreign takeovers – something echoed by both the EU's trade and competition commissioners.
Many European leaders have been faced with their very first real-life stress test – and not all of them have passed.